California Just Changed the Rules on Sign-On Bonuses and Training Repayment. Veterinary Professionals Need to Know This.

If you work in veterinary medicine in California, or if you own or manage a practice that hires there, a new state law that took effect January 1, 2026 directly affects how employment contracts with sign-on bonuses, training reimbursements, and repayment clauses can be written and enforced.

California Assembly Bill 692 significantly restricts what are commonly called stay-or-pay provisions, the contract terms that require employees to pay back bonuses or training costs if they leave before a set period or are terminated. These clauses are widespread in veterinary employment, particularly in corporate group and specialty hospital settings where sign-on bonuses and continuing education reimbursements have become standard recruiting tools.

What the Law Actually Prohibits

AB 692 bars employers from including contract terms that require workers to repay a debt to an employer, training provider, or debt collector when employment ends. It also prohibits provisions that allow employers to initiate or resume collection of a debt upon separation, and any clause that imposes a penalty, fee, or cost connected to the termination of the employment relationship.

Read plainly: if your offer letter or employment contract includes a provision requiring you to pay back a sign-on bonus or training costs because you resigned before a certain date, that clause may now be unenforceable in California unless it meets very specific requirements.

What Is Still Permitted

The law carves out narrow exceptions, and the procedural requirements attached to them matter.

For sign-on and retention bonuses, repayment clauses are still allowed, but only if the repayment terms are in a separate standalone agreement, not buried in the main employment contract. The employee must be notified of their right to consult an attorney and given at least five business days to do so before signing. Any repayment obligation must be prorated over a defined retention period of no more than two years, cannot accrue interest, and can only be triggered if the employee leaves voluntarily or is terminated for misconduct. Employees must also have the option to simply defer receiving the bonus until the retention period ends, with no repayment obligation attached.

For tuition and credential reimbursement, repayment is permitted only if the credential agreement is separate from the employment contract, obtaining the credential was not a condition of employment, and repayment is limited to the employer's actual cost. Employees who are terminated without misconduct are exempt from repayment.

Government loan repayment and forgiveness programs, approved apprenticeship programs, and residential property transactions are excluded from the law entirely.

The Enforcement Risk Is Real

AB 692 creates a private right of action, meaning employees can sue individually or on behalf of similarly situated workers. Damages are the greater of actual damages or $5,000 per affected employee, plus attorneys' fees and injunctive relief. For a corporate group or multi-location practice with multiple employees subject to non-compliant contracts, that exposure adds up quickly.

What This Means If You're a Veterinary Professional in California

If you have signed or are about to sign an employment agreement with a sign-on bonus or training repayment clause, it is worth reviewing that agreement against these new requirements. Clawback provisions that do not meet AB 692's procedural standards are now legally vulnerable. That does not mean you should simply stop repaying a bonus you agreed to return, but it does mean you have grounds to consult an employment attorney before assuming any such obligation is enforceable.

If you are a practice owner or manager in California, your offer letters and employment agreements should be reviewed now if they have not been already. Provisions that were standard a year ago may create significant liability today.

Are Other States Watching?

California is not alone in scrutinizing stay-or-pay provisions. The Federal Trade Commission signaled interest in these clauses as part of its broader look at non-compete and restrictive employment practices, though federal rulemaking in this area has faced legal challenges. Several states have introduced or are considering similar legislation targeting training repayment agreements and sign-on bonus clawbacks, particularly as workforce mobility and the cost of post-secondary education have become more prominent policy concerns.

California tends to be an early mover on employee protections that eventually influence other states. Veterinary professionals and employers outside California would do well to monitor whether similar legislation advances in their own states in the coming legislative cycles.

As always, this article is informational, not legal advice. If AB 692 affects your employment situation or hiring practices, consult an employment attorney licensed in California.

TAGS: employment law, California, AB 692, sign-on bonus, contracts, workforce, career, practice management, veterinary employment, new graduates