California AB 692: How New Rules Will Affect Training Repayment and Employee Mobility

Under the new law, contracts that require employees to repay training costs, limit employee mobility, or authorize third parties to enforce repayment will be considered void. Employers will no longer be able to ask departing employees to pay fees such as replacement hire costs, visa or immigration-related reimbursements (including relocation expenses), or compensation for lost goodwill or profits.

Certain repayment agreements may still be allowed, but only under strict conditions. Specifically, agreements must be separate from the employment contract and include a five-business-day waiting period to allow the employee to seek legal counsel. Repayment obligations must be interest-free, prorated, and limited to two years. Benefits may be deferred until the qualifying period is completed, with no reimbursement required if the employee remains employed. Additionally, repayment may only be triggered if the employee leaves voluntarily or is terminated for cause by the employer.

Retention bonuses or similar payments may still be offered under the statute, provided they comply with its strict requirements and are not used to get around the law's restrictions.

Tuition reimbursement agreements are also permitted under AB 692, but only if the educational credit leads to a transferable credential. A transferable credential is one that:

• Is supported by a degree or certification issued by a qualified third-party institution,
• Is not required for the employee's current position (for example, an MBA, but not a nursing degree for a patient care role), and
• Applies to employment opportunities beyond the employee's current employer.

Violations of AB 692 may result in significant penalties, including the greater of the actual repayment amount or $5,000 per affected employee, as well as attorneys' fees and injunctive relief.

Although the bill does not clearly define the scope of covered individuals, reasonable interpretations suggest it may apply to employees relocating into, out of, and within California. Employers should review existing mobility policies, employment agreements, and repayment documentation. It's strongly recommended to consult legal counsel to assess compliance risks and determine what modifications may be needed before the law takes effect.

This is an evolving situation, and Altair will continue to monitor California AB 692 as it moves forward.

For further guidance or assistance in reviewing your mobility and training repayment policies, please contact your legal advisor.