Existing law declares that contracts restraining a person from engaging in a lawful profession, trade, or business are void as against public policy, except as expressly authorized.
Effective January 1, 2026, AB 692 prohibits employment contracts or work-related agreements that do the following: (1) require a worker to repay an employer, training provider, or debt collector if the worker’s employment or work relationship ends; or (2) impose any penalty, fee, or cost as a result of termination. AB 692 exempts certain repayment obligations under contract, including the following: (1) a governmental loan repayment or forgiveness program; (2) a tuition repayment for transferable educational credentials that satisfies certain conditions; (3) an approved apprenticeship program; (4) the receipt of discretionary or unearned monetary payment at the outset of employment (i.e., a signing bonus); and (5) the lease, financing, or purchase of residential property.
AB 692 authorizes an employee or their representative to bring a civil action to recover actual damages or $5,000 per affected employee, whichever is greater, as well as injunctive relief, attorney’s fees, and costs. AB 692 specifies that these rights and remedies do not restrict other enforcement options under state law.
(AB 692 adds Section 16608 to the Business and Professions Code and Section 926 to the Labor Code.)