California AB 692: Immigration-Related Contract Restrictions Now in Effect

Key Point 

• The California State Legislature introduced AB 692 to prohibit noncompete agreements between employers and workers 

AB 692 Requirements  

On October 13, 2025, California enacted AB 692, a law that prohibits employers from entering into or enforcing: 

• Noncompete agreements: Contracts that prevent employees from working for competitors or starting similar businesses after leaving a job. 
• “Stay-or-pay” clauses: Provisions requiring workers to repay costs, such as training, relocation or visa sponsorship fees, if they leave their jobs within a certain timeframe. 

Effective January 1, 2026, the law reinforces California’s ban on restraints of trade in employment. This change is especially significant for immigrant workers, as it protects them from exploitative contracts that tie their immigration status to restrictive employment terms. 

Attorney Insight

California employers hiring foreign nationals should work closely with labor and employment counsel to ensure all employment contracts—especially those involving visa sponsorship or reimbursement provisions—comply with AB 692’s ban on noncompete and “stay-or-pay” clauses.

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