“Stay-or-Pay” and Training Repayment Disputes in San Diego

The Impact of Assembly Bill 692 on San Diego Repayment Clauses

California Assembly Bill 692 took effect on January 1, 2026, to restrict the use of predatory repayment contracts. As a San Diego worker, understanding whether this bill applies to your case is key to determining next steps.

The bill makes it unlawful for employers to include any of these terms in employment contracts regarding a worker’s end of employment:

• Require payment of a debt
• Authorize the collection of a debt
• End the forbearance of a debt
• Impose a penalty or fee, unless the contract meets certain legal allowances of repayment

Most TRAPs or “stay-or-pay” contracts are illegal under this bill, and this applies to both traditional employees and independent contractors. Employers who attempt to enforce a banned repayment provision may face statutory damages of at least $5,000 per violation, plus your attorney fees.

When Are Repayment Contracts Lawful in California?

Many types of TRAPs are unlawful under California AB 692, so being faced with any of these agreements should give you pause. Repayment agreements are only strictly lawful in three narrow scenarios:

• Sign-on/retention bonuses: Sign-on bonuses that require workers to stay in the position for a certain amount of time may be lawful only if the agreement is separate from the employment contract, is prorated over a maximum of two years, does not charge interest, and provides the employee with at least five days to consult an attorney.
• Government/apprenticeship programs: AB 692 specifically allows for approved government loan forgiveness and state-approved apprenticeship programs.
• Transferable credentials: Employees may be required to repay third-party accredited credentials or degrees initially reimbursed or paid for by their company. However, repayment must be enumerated in a standalone agreement, prorated, and capped at the exact cost to the employer.

Still, repayment can only be mandated if an employee voluntarily leaves the company or is terminated for misconduct. Your employer may need to show evidence that you violated job standards or failed to meet the expectations of your position.

The 24-Hour Checklist When Facing a Training Debt Demand

If your employer has threatened legal action against you in an attempt to collect repayment after you resign, this checklist can help you begin preparing a strategic legal defense:

• Review your onboarding paperwork and locate the contract or clause that specifies the exact dollar amount the company claims you owe. (If your company is requesting something different from what is in this paperwork, they may already not have a solid case against you.)
• Check whether the training you received resulted in an industry-standard credential that you can take with you or simply covered internal company processes.
• Make digital copies of all written communications where supervisors mandated the training as a requirement for keeping the job, and store them in multiple locations.
• Request an itemized breakdown of the actual costs incurred by your company for the training you received.
• Avoid signing any final paycheck deduction authorizations during your exit interview until you consult a legal professional.

Where Debt Traps Concentrate: The San Diego Employment Landscape

California Assembly Bill 692 applies to employment contracts entered into on or after January 1, 2026, so predatory repayment contracts made before that date may remain legally enforceable under prior law.

Certain industries across San Diego’s job market may be more likely to enact financial repayment penalties:

• Healthcare staff, such as nurses and medical technicians, are often forced into lengthy service commitments to offset initial clinical orientation costs.
• Aviation and logistics providers sometimes face steep bills for standard safety certifications required to operate and work on planes.
• Junior programmers in the Sorrento Valley tech space are often required to repay costs associated with proprietary coding bootcamps if they accept external job offers.

Whether you work in one of these or other industries, challenging predatory collection tactics requires prompt intervention and legal guidance.

The Legal Mechanics of a Training Repayment Dispute

Facing any kind of legal action can feel overwhelming, but even more so when it comes from your employer. Understanding what the legal progression might look like helps you prepare for the road ahead.

• Receive the initial demand: The legal process starts when your employer sends you a formal demand letter requesting repayment of training costs. If you have not received any such demand letter, your employer has not yet initiated legal action.
• Review documentation: At this point, your legal representation will help you review your employment agreement to see if it falls into the narrow statutory exceptions to Assembly Bill 692, such as voluntary tuition programs.
• Send a “cease and desist” letter: Your attorney may then draft a formal letter explaining that the contract violates California public policy and requesting that the legal action be dropped.
• File action against your employer: If the provisions in your contract were unlawful, your attorney may advise you to file a lawsuit against your employer and seek statutory penalties for their use of non-compliant employment agreements.

Understanding Deadlines and Final Wage Protections

Acting quickly is often important when you are facing a training repayment dispute in San Diego. Certain deadlines may apply to your case, and missing them could bar you from taking legal action.

The first deadline applies to withholding final wages due to repayment obligations. Under California Law, employers are prohibited from withholding your final paycheck to offset a disputed training debt. They must pay your final wages either immediately upon termination or within 72 hours of your voluntary resignation.

Every day beyond these deadlines that an employer delays your pay, they would owe you a full day of wages as a waiting time penalty, with a maximum of 30 days.

If your employer violated Assembly Bill 692 and you plan to seek statutory damages through a lawsuit, you generally have three years to do so. The clock would start on the date your employer attempted to enforce the illegal contract or seek repayment from you.

Meanwhile, the statute of limitations for a breach of a written contract is generally four years from the date the contract was broken in California. This may be relevant if your employer is trying to enforce an illegal stay-or-pay contract that conflicts with your initial employment agreement.

An employment attorney can help you understand the deadlines that may apply to your case and avoid missing them.

San Diego Industry Spotlights

San Diego’s thriving job market encourages tens of thousands of workers each year to relocate to the city for work. Jobs across the biotech, tech, defense, and military sectors are especially booming, and relocating professionals are heavily drawn to these sectors.

Whether you work in one of these industries or another San Diego job sector, knowing what a predatory repayment agreement may look like in your position can help you identify potential instances of AB 692 non-compliance. These are a few examples:

• Nurses and emergency medical technicians often face demands to repay thousands of dollars for mandatory hospital system training upon leaving their positions.
• Drivers in commercial transportation and logistics operating out of distribution centers near Chula Vista may face contracts requiring them to repay commercial driver’s license training fees.
• Graphic designers and IT support specialists often face predatory agreements disguised as professional development loans and are required to repay the borrowed amount without clear warning.

Before repaying training costs, consult an attorney about your rights under AB 692.

Speak With an Attorney From D.Law Today

California is one of only a few states with current protections against training repayment agreement provisions. If your employer is attempting to financially penalize you for leaving your position, you may have grounds for legal action.

D.Law represents workers through training repayment disputes in San Diego. You can request a free legal consultation with our attorneys today by calling 818-275-5799.

Local Resources for San Diego Workers

As a San Diego worker, knowing where to turn when your rights have been violated is key. These are a few local resources to keep on file:

• California Labor Commissioner’s Office:
  The San Diego division of the Labor Commissioner’s Office is located at 7575 Metropolitan Dr. This agency investigates illegal paycheck deductions and waiting time violations.
• San Diego Central Courthouse:
  Located at 1100 Union St., this courthouse hears many civil lawsuits involving unlawful business practices and contract disputes.
• San Diego County Self-Help Resources:
  This page includes a range of free resources to help workers respond to workplace situations.

Glossary of Legal Terms

Find simple explanations below for several legal terms that may arise during your case. Have more questions? Reach out to an attorney from D.Law for support.

• Statutory damages:
  The financial penalties set by the law that your employer may legally owe for violating the California AB 692 compliance provisions. For violations of AB 692, these are either $5,000 or your actual damages, whichever is greater.
• Statute of limitations:
  The legal deadline for filing a lawsuit. Missing this deadline could bar you from seeking compensation.
• Training repayment agreement disputes:
  Legal disagreements over whether an employee is obligated to repay training costs after leaving the company. D.Law represents clients through training repayment disputes in San Diego.
• Training Repayment Agreement Provision (TRAP):
  A type of contractual clause in employment agreements that would require the worker to repay educational expenses if they leave the company before a certain deadline. These are largely unlawful under AB 692.
• Unlawful wage deduction:
  The practice of subtracting funds from an employee’s paycheck to cover disputed debts, business expenses, or other costs. This practice is illegal in many cases in California.
• Waiting time penalties:
  The statutory fines your employer would owe if they failed to provide your final paycheck by the legal deadline, which is immediately upon termination or within 72 hours of voluntarily leaving the company.
• Worker mobility laws:
  Laws surrounding the movement of workers within the labor market or within an organization. California has some of the strongest mobility laws, including the “stay-or-pay” ban under AB 692.