If your practice offers sign-on bonuses or relocation packages to recruit physicians, nurse practitioners, or other providers with a requirement that they pay some of it back if they leave early, California’s Assembly Bill 692 (AB 692), effective January 1, 2026, changes what’s allowed in new contracts.
What Changed:
AB 692 targets “stay-or-pay” clauses and training repayment provisions. In plain terms: it’s now generally unlawful in California to require a worker to repay money to an employer, training provider, or debt collector simply because they left their job. This is the exact structure practices have long used to protect large sign-on bonuses, making this especially relevant to physician and provider recruitment, where sign-on bonuses are now standard and can run into six figures.
A few key facts:
- AB 692is NOT retroactive: it only applies to contracts signed on or after January 1, 2026.
- “Employer” is broadly defined: likely includes hospital, MSO, or affiliate entities, not just the direct employer.
- Penalties are real: the greater of $5,000 per worker or actual damages, plus attorney’s fees.
The Good News: Bonuses Aren’t Dead, They Just Need a New Structure
AB 692 includes a few exceptions, including a specific exception that lets practices keep using repayable sign-on bonuses, IF structured correctly. To qualify, the bonus repayment terms must:
- Be in a separate agreement from the employment contract
- Give the provider written notice of their right to consult an attorney, with at least 5 business days to do so
- Charge no interest
- Prorate repayment based on time remaining in the retention period
- Cap the retention period at 2 years
- Offer the provider an option to defer the bonus to the end of the period instead, with no repayment risk
- Only trigger repayment for voluntary departure or termination for misconduct
A flat “repay it all if you leave within 5 years” bonus no longer works, but a 2-year, prorated, no-interest structure, offered separately and reviewed by counsel, still can.
Example: A practice offers Dr. Smith a $40,000 sign-on bonus with a 24-month retention period, structured to meet the exception: separate agreement, 5-day attorney review window, no interest, and repayment prorated by time served. If she leaves voluntarily after 12 months, she owes 50% back ($20,000); after 20 months, only about $6,667. If the practice lets her go without cause, she owes nothing. She also has the option to skip the upfront payment and simply collect the full $40,000 at the end of the 24 months with no repayment risk at all.
What to Do Now
- Review current sign-on bonus and relocation templates for repayment provisions
- Restructure bonuses to fit the exception above where possible
- Check whether recruitment money routes through an affiliate (it’s likely still covered)
- If recruiting multi-state, confirm compliance in each state, not just California
- Remember, AB 692 sits alongside Stark Law’s fair-market-value requirements; a compliant package needs to satisfy both
Bottom Line
Sign-on bonuses aren’t going away, but the way they’re structured has to change for new contracts. Getting your recruitment agreements reviewed now is easier than untangling a dispute later.
If you’d like your provider agreements reviewed for AB 692 or the equivalent law in another state, we’re happy to help.
This article is for general informational purposes only and does not constitute legal or tax advice. Every practice’s situation is different, and the facts of your arrangement matter. Please contact our office to discuss your specific circumstances.