Overview
- AB 692 bars contract terms that require payment upon separation, restart debt collection when employment ends, or impose penalties or fees tied to termination.
- The law is prospective only and applies to agreements entered into on or after January 1, 2026.
- Exceptions include government loan programs, tuition repayment for transferable credentials meeting strict conditions, approved apprenticeships, certain upfront discretionary payments, and contracts tied to residential property.
- For discretionary signing or similar upfront payments, any clawback must be in a separate agreement with at least five business days to consult an attorney, be prorated with no interest, cap retention at two years, allow deferral of payment to avoid repayment, and be triggered only by voluntary departure or misconduct.
- Enforcement allows workers or representatives to sue for a minimum of $5,000 per affected worker plus injunctive relief and attorneys’ fees, and advisers flag unresolved questions about who counts as a covered worker, what constitutes an employment contract, and how equity-linked arrangements may be treated.