California AB 692: What Employers Need to Know About Relocation Repayment Agreements

Employee relocation packages are an attractive tool for employers in hiring and retaining employees. From moving new hires to transferring employees between locations, relocation assistance eases the transition and helps employees start their new role on the right foot.  While these programs remain valuable, a new California law requires employers to rethink how they are managed.

Starting January 1, 2026, California's Assembly Bill 692 fundamentally changes how employers can structure employee relocation agreements. If your company offers relocation assistance to attract or retain talent, this legislation directly affects how you design those packages—and failing to comply carries significant financial penalties.

New Restrictions, High-level

AB 692 makes it unlawful for employment contracts to include terms requiring employees to repay relocation costs, training expenses, sign-on bonuses, or other benefits if their employment ends. Under the new rules, any contract term requiring debt repayment upon termination, authorizing debt collection when employment ends, or imposing penalties for leaving is void and unenforceable for agreements entered into on or after January 1, 2026.

The scope is broad—covering anyone performing work in California, regardless of where the employer is headquartered. Remote workers and employees who relocate to California are covered under this law.

Practical Challenges for Relocation Programs

Implementing AB 692 creates operational challenges for lump sum relocation programs. The law requires employers to offer employees the option to defer receipt of relocation payments until the end of any retention period, thereby eliminating the repayment obligation. This creates a practical conflict: employees need relocation funds upfront to cover moving costs and temporary housing. Deferring payment until after a retention period defeats the fundamental purpose of relocation assistance.

Organizations must determine whether the risk of upfront payment and non-recovery justifies continuing traditional relocation structures, or whether an alternative approach—such as milestone-based payments or enhanced vetting—better serves their talent mobility strategies.

Exceptions for Relocation and Sign-On Bonuses

The law does allow employers to structure repayable relocation assistance and sign-on bonuses, but only when specific conditions are met. For discretionary payments provided at the start of employment—including relocation packages—repayment terms must be documented in a separate agreement from the primary employment contract. Employees must receive written notice of their right to consult an attorney and be given at least five business days to do so before signing.

Any repayment obligation must be prorated based on the remaining retention period, which cannot exceed two years, and cannot accrue interest. Perhaps most significantly, repayment can only be required if the employee voluntarily resigns or is terminated for misconduct—not for layoffs, position eliminations, or other employer-initiated separations.

Pro Tip: Structure your relocation agreements as standalone documents separate from offer letters and employment contracts. This separation is not optional under AB 692—it's a legal requirement for any repayment provisions to remain enforceable.

Consequences of Non-Compliance

AB 692 creates a private right of action allowing affected workers to sue for the greater of actual damages or $5,000 per worker, plus injunctive relief and attorney's fees. Employers may also face representative actions under California's Private Attorneys General Act (PAGA), significantly increasing potential exposure. Non-compliant agreements are void as unlawful restraints of trade, meaning employers cannot enforce repayment provisions even for employees who voluntarily resign shortly after receiving substantial relocation benefits.

Your Partner in Employee Mobility

Navigating changing regulations while maintaining effective employee relocation programs requires experienced partners who understand the operational realities and can handle logistics of a relocation for your employees. Chipman Relocation brings decades of corporate relocation expertise to help organizations design mobility programs that support employees and protect company interests within evolving compliance frameworks. Contact us today to discuss how we can support your employee relocation needs.

Disclaimer: This article is not intended as legal advice, but to make readers aware of a significant change imposed by California AB-692. As with any contract, consult with a qualified attorney.