California has long set the pace for employment legislation, and Assembly Bill No. 692 (AB 692) is no exception. Effective for contracts entered into on or after January 1, 2026, this new law significantly restricts an employer’s ability to require repayment of certain employment-related costs when a worker leaves the organization.
For corporate mobility programs, where repayment agreements have historically been a standard risk-management tool, AB 692 introduces new considerations that mobility, HR, and legal teams will need to navigate carefully.
A few notes before we dive in:
- Nothing in this blog should be considered legal advice. Anything you implement in your program should be cleared by your legal counsel.
- All statistics noted in the post below were taken from the Aires Pulse Survey on repayment agreements. You can find the full survey here: Aires Pulse Survey - Repayment Agreements
What Does AB 692 Do?
At its core, AB 692 makes it unlawful for employment contracts entered into on or after January 1, 2026, to include provisions that require a worker to repay a “debt” if their employment or work relationship with a specific employer ends. The definition of “debt” is intentionally broad and can include employment-related or education-related costs.
The law specifically prohibits contract terms that:
- Require repayment when employment ends
- Restart or accelerate collection of a debt upon separation
- Impose penalties, fees, or costs tied to termination of employment
These prohibited agreements are deemed contracts that restrain trade and are void as contrary to public policy under California law.
Importantly, the law also introduces private rights of action, allowing workers to pursue claims individually or on behalf of others similarly situated. Employers found in violation may be liable for actual damages or $5,000 per worker (whichever is greater), plus attorney’s fees and injunctive relief.
Why This Matters for Mobility Programs
Repayment agreements, often referred to as “clawbacks”, are deeply embedded in mobility program design. According to the Aires Pulse Survey on repayment agreements, 95% of companies require repayment agreements for U.S. domestic relocations, and 98% require all relocating employees to sign them.
Most of these agreements require repayment of all relocation-related expenses, whether reimbursed directly to the employee or paid on their behalf to service providers, an approach used by 96% of surveyed companies.
AB 692 challenges this long-standing structure by calling into question whether traditional relocation repayment provisions tied to employment separation will remain enforceable in California for new agreements.
Key Exceptions, But With Tight Guardrails
AB 692 does allow for limited exceptions that may be relevant to mobility programs, including:
- Certain government loan repayment or forgiveness programs
- Tuition repayment for transferable credentials, if offered separately from employment and structured with strict proration and termination protections
- Discretionary or unearned sign-on or retention bonuses, provided they meet detailed requirements (separate agreements, legal review window, proration, capped retention period, and employee-initiated separation)
Notably, most traditional relocation repayment agreements do not neatly fit into these exceptions, particularly where relocation benefits are tied directly to ongoing employment and triggered by voluntary resignation.
The Practical Impact: What Mobility Teams Should Be Thinking About Now
AB 692 does not invalidate existing agreements retroactively, but it does require a reset in thinking for California-based moves and California-governed employment contracts going forward.
This is especially important given that two-year repayment terms are the most common structure across mobility programs, and most agreements are prorated over time, practices confirmed by the Aires Pulse Survey.
Steps Mobility Managers Can Take to Minimize Impact
While AB 692 introduces complexity, there are proactive steps mobility leaders can take now to reduce disruption and risk:
- Inventory Current Repayment Agreements
Understanding your current exposure is a critical first step. Start by identifying where repayment agreements are used today, particularly for:
- California-based employees
- Employees relocating into California
- Agreements governed by California law
- Partner Early With Legal Counsel
Given the law’s broad definitions and enforcement mechanisms, close coordination with employment counsel is essential. Legal review should focus on:
- Whether existing repayment structures will be permissible for new agreements
- Whether alternative benefit structures may be more defensible
- Re-evaluate Risk Mitigation Strategies
With enforcement of repayment agreements already inconsistent, and with management discretion being the top reason companies choose not to pursue repayment, this may be an opportunity to rethink how risk is managed, such as:
- Shorter benefit eligibility windows
- Tiered benefits tied to tenure
- Tighten Program Governance and Documentation
Even before AB 692 takes effect, the survey data shows that clarity and consistency remain challenges in repayment enforcement. Clear definitions, consistent processes, and centralized tracking will be even more critical in a post-AB 692 environment.
- Communicate Changes Thoughtfully
As repayment practices evolve, transparency with employees will matter. Mobility programs that clearly explain benefit design and expectations tend to reduce disputes, regardless of legal changes.
Looking Ahead
AB 692 represents a meaningful shift in how California views employment-related repayment obligations. For mobility professionals, it’s a reminder that program design must continuously evolve alongside the regulatory landscape.
While repayment agreements have historically been a cornerstone of mobility risk management, the future may require more nuanced, employee-centric approaches, especially in jurisdictions like California that continue to reshape the boundaries of enforceable employment contracts.
Mobility teams that act early, partner closely with legal counsel, and leverage data-driven insights will be best positioned to adapt with confidence.