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California's AB 692, officially in effect as of Jan. 1, 2026, is bringing notable changes to how employers may use repayment or “stay‑or‑pay” provisions in employment agreements. While the law applies broadly to various repayment obligations, AB 692 has meaningful implications for organizations that have historically used reimbursement agreements when sponsoring foreign national employees for U.S. permanent residency (green cards).
Applying AB 692 to Green Card Reimbursement Agreements
AB 692 limits agreements that require employees to repay certain costs if they leave their job — largely prohibiting the use of these types of agreements in California for the repayment of costs associated with sponsoring immigrant and non-immigrant visas and permanent resident status. AB 692's restrictions are triggered by separation and only apply to any new agreement entered into on or after Jan. 1, 2026. Agreements executed prior to Jan. 1, 2026 remain valid and subject to the existing legal requirements at the time the agreement became effective.
While AB 692 does require adjustments to sponsorship practices for California employers regarding the repayment of costs, it does not restrict an employer's ability to sponsor workers for permanent residency. Instead, the law simply changes how related costs for sponsorship may be recouped.
A Measured, Forward‑Looking View
While AB 692 restricts the use of repayment agreements for immigration sponsorship costs upon separation, its practical impact on California employers in this context is relatively limited. Existing federal law already prohibits the reimbursement of any costs associated with the labor certification (PERM) application process, the most expensive phase of the green card process. Additionally, existing case law has limited the enforceability of reimbursement agreements that are not prorated by the employment term. As such, the existing limitations on green card sponsorship repayment agreements have resulted in the slow phase-out of these agreements across multiple industries in recent years, with agreements being replaced by more practical measures for effectively improving employee retention.
Now that AB 692 is in effect, California employers who rely on green card repayment agreements should seek alternative best practices and policy adjustments following the elimination of these agreements from their sponsorship processes. Jackson Lewis' immigration attorneys are available to answer any questions you may have about implementing the requirements of AB 692.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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