California has enacted a landmark employment law that will reshape how carriers and logistics firms structure contracts with drivers and staff. Starting January 1, 2026, the state prohibits “stay-or-pay” provisions, contract terms requiring workers to repay training costs, bonuses, or fees if they leave before a set period.
This shift affects every trucking company operating in California, from owner-operator fleets to national carriers. Whether you hire drivers, dispatchers, or warehouse staff, understanding compliance matters now.
What AB 692 California Trucking Law Prohibits
The law targets employment contracts signed on or after January 1, 2026. It bans any provision that requires workers to pay back their employer, training provider, or debt collector when employment ends.
Prohibited Contract Terms Include
Companies can no longer require repayment of training costs, licensing fees, or operational expenses when a worker quits or faces termination. The law also bars debt collection authorization by employers or third parties after employment ends.
Additionally, carriers cannot impose penalties such as retraining fees, “quit” charges, liquidated damages, replacement hiring costs, or lost goodwill assessments tied to employment termination.
California treats these clauses as unlawful restraints on professional practice. For trucking employers who previously required drivers to repay training investments or return sign-on bonuses for early departure, these provisions face elimination under the new standard.
How This Changes Driver Employment in California
Benefits for Drivers and Job Seekers
Workers gain substantially increased mobility and freedom. Drivers can accept employment or training without concern about financial penalties for leaving. The law removes debt-based contract traps.
The transportation sector has historically used repayment provisions for training, licensing, certifications, and relocation assistance. These practices now face prohibition when structured as debt payback arrangements.
Requirements for Employers and Fleets
Carriers must audit existing agreements immediately. All employment contracts, training repayment forms, sign-on bonus agreements, and retention bonus structures need review and revision before January 2026 to prevent legal exposure.
The statute includes narrow exceptions for specific repayment obligations, but these carry strict requirements. Permitted arrangements include contracts for discretionary signing bonuses and tuition for transferable credentials like commercial driver’s licenses, but only when companies follow precise conditions: separate agreements, prorated repayment terms, mandatory attorney consultation rights, zero interest charges, and additional safeguards.
Impact on Recruitment Incentives
Many carriers offer sign-on bonuses or training reimbursement programs to attract qualified drivers. AB 692 restrictions require structural changes to these arrangements, potentially affecting enforceability. Some fleets may need to reconsider retention-based bonus schemes entirely.
Non-compliance creates significant legal risk. Violations subject employers to civil actions with minimum penalties of $5,000 per affected worker, plus injunctive relief, attorneys’ fees, and costs.
Why Transportation Companies Face Major Changes
The trucking and logistics industries have long depended on repayment and clawback arrangements to offset investment in new hires. Common practices included:
Training new drivers in compliance protocols, safety standards, commercial license preparation, and specialized equipment operation represents substantial carrier expense. To protect these investments, companies traditionally used “stay-or-pay” agreements conditioning cost coverage on minimum employment periods.
Sign-on and retention bonuses attracted drivers with expectations of specific tenure requirements or bonus repayment obligations. Under AB 692 California trucking regulations, these traditional approaches require complete reimagining.
The legislation recognizes that worker-driven debt, even when presented as voluntary, functions as an unfair mobility restriction that traps employees in positions.
For companies operating in or recruiting from California, this represents a genuine paradigm shift. Compliance extends beyond legal housekeeping to affect recruiting costs, retention strategies, and training investment approaches.
Understanding Permitted Exceptions Under AB 692
The law isn’t absolute. Several important exceptions allow specific repayment agreements to continue.
Transferable Credentials Like Commercial Driver’s Licenses
Companies may still require repayment for obtaining transferable credentials such as CDLs, but only under these strict conditions:
The repayment contract must exist separately from the employment agreement. Obtaining the credential cannot be an employment condition—workers cannot be required to get the credential as a hiring prerequisite.
The repayment amount cannot exceed actual employer costs. Repayment must be prorated without acceleration clauses. No repayment is required if the company terminates the worker, unless termination results from misconduct.
The critical challenge: Most CDL training programs currently make credential completion an employment condition, meaning drivers must finish training before hiring. These programs likely won’t qualify for this exception as currently structured.
The key distinction is that while a CDL is obviously required to drive trucks, the law prohibits making the training itself a prerequisite for employment if companies want to retain repayment ability.
Carriers must fundamentally restructure CDL training program approaches to use this exception, potentially treating credentials as something workers obtain independently or after hire rather than during the hiring process.
Discretionary Financial Bonuses
Contracts for discretionary monetary payments at employment start may include repayment terms if companies meet certain strict conditions. These include separate repayment terms, notification of attorney consultation rights with at least five business days to exercise them, prorated repayment based on retention periods not exceeding two years without interest, the option to defer payment receipt, and repayment only required for voluntary separation or misconduct-based termination.
This exception provides a pathway for carriers to continue using sign-on bonuses as recruitment tools, though with more worker-friendly terms.
Apprenticeship Programs
Contracts related to enrollment in apprenticeship programs approved by California’s Division of Apprenticeship Standards are exempt from prohibitions. This creates opportunities for carriers to develop formal apprenticeship structures meeting state standards.
Government Loan Programs
Contracts entered under loan repayment assistance programs or loan forgiveness programs provided by federal, state, or local government agencies also receive exemptions.
Compliance Steps for Trucking Companies
If you operate a trucking or logistics company in California or recruit drivers there, follow this compliance checklist:
Audit All Employment Agreements
Inventory all employment-related agreements including sign-on bonuses, retention bonuses, training repayment agreements, onboarding contracts, and relocation or license-cost reimbursement plans.
Remove Prohibited Clauses
Eliminate or revise any “stay-or-pay” or debt-repayment clauses tied to employment termination.
Restructure Bonus Programs
If offering bonuses or reimbursements after January 1, 2026, ensure they meet narrow exception criteria with separate contracts, upfront notice, and prorated repayment where applicable. Consider offering bonuses or reimbursements without repayment obligations as unconditional benefits.
Train Internal Teams
Educate HR personnel, recruiters, and legal/compliance teams about the new law so prohibited clauses don’t appear in future contracts.
Communicate with Workers
Inform your workforce and new hires about their rights to avoid misunderstandings around departure obligations.
Consult Legal Counsel
Work with qualified employment law attorneys, especially if you currently use or plan to use loan-based incentive structures, training investments, or repayment obligations. Given AB 692’s complexity and significant non-compliance penalties, professional legal guidance is essential to ensure your specific practices meet requirements.
AB 692 in the Broader Regulatory Context
AB 692 arrives while California trucking companies still adjust to other significant regulatory changes. AB5’s restrictions on independent contractor classification have already forced many carriers to reclassify owner-operators as employees. Now AB 692 limits how companies structure employment terms for those workers.
This dual regulatory pressure creates a challenging environment. Carriers must hire drivers as employees while facing restrictions on training investment recoupment and retention incentive structuring. For many companies, this requires fundamental rethinking of recruitment and retention strategies.
Beyond California, similar laws are under consideration in other states. Federal agencies including the Consumer Financial Protection Bureau and Federal Trade Commission have increased scrutiny of training repayment agreements across industries. California developments often signal broader national trends.
Moving Forward: Strategic Adaptation
AB 692 California trucking regulations represent a significant shift in employment law, reaching deeply into how transportation industries recruit, train, and retain workers.
For trucking employers, compliance requires more than quick contract edits. It demands rethinking the old “we pay, you stay” model. Companies that adapt quickly by investing in genuine driver development, creating supportive work environments, and building retention strategies based on positive workplace culture rather than contractual obligations may find themselves with competitive advantages.
On the flip side, AB 692 offers drivers, especially those in demanding fields like trucking, greater freedom and protection from exploitative debt-based agreements. In an industry where the human element remains irreplaceable, treating drivers as valued professionals rather than contractual obligations may prove the best business strategy.
If you’re a carrier, recruiter, or fleet manager working with or in California, now is the time to plan. Review, revise, and rebuild your incentive and training-cost structures. The alternative isn’t just legal risk, it could hamper recruitment, retention, and workforce trust.
IMPORTANT LEGAL DISCLAIMER:
This article is for general informational and educational purposes only and does not constitute legal advice. AB 692 involves complex legal requirements with significant compliance obligations and penalties. Every trucking company’s situation is unique, and the information provided here may not apply to your specific circumstances.
Before making any changes to your employment contracts, training agreements, bonus structures, or retention programs, you should consult with a qualified employment law attorney who is familiar with California labor law and can provide specific advice tailored to your business operations. Do not rely solely on this article when making legal or business decisions regarding AB 692 compliance.
The authors and publishers of this article are not responsible for any actions taken or not taken based on the information provided herein.
