Are stay-or-pay employee repayment terms enforceable?

It depends on the state and the structure. Some states prohibit most employee repayment terms by statute, some allow only narrow forms, and others treat repayment as an ordinary contract subject to wage-payment and penalty limits. See the comparison table for each jurisdiction.

Can an employer claw back pay an employee already earned?

Many disputes turn on the earned-pay line. A forfeitable bonus conditioned on continued service may be treated differently from a clawback of compensation that has already vested or been earned.

Can repayment come out of the final paycheck?

Final-pay deductions are often more restricted than a separate contract claim. Some states bar the deduction, some require written authorization, and others impose wage-law limits.

U.S. Law Survey

Stay-or-Pay & Employee Repayment Laws by State

Compare 3 covered U.S. jurisdictions. A side-by-side comparison across covered U.S. states of how they treat employee repayment and "stay-or-pay" terms — whether repayment is enforceable, whether already-earned pay can be clawed back, and whether final-pay deductions are limited.

← Back to the topic hub

Stay-or-Pay & Employee Repayment Laws by State — 3 jurisdictions. Open a row for details, or follow a link to the full practice guide.
Jurisdiction	Are repayment ("stay-or-pay") terms enforceable?	Summary	Main law or case	Last reviewed
	Prohibited	Most employee repayment (stay-or-pay) terms are void for contracts entered on or after Jan 1, 2026, subject to narrow statutory exceptions such as the sign-on-bonus carve-out.	Cal. Bus. & Prof. Code § 16608(b)(1)(A). California Labor Code Sec. 926.	Jun 30, 2026
Claw back pay already earned? No Take it out of the final paycheck? Not allowed A statute limiting stay-or-pay? Comprehensive ban Training/tuition repayment treated differently? Restricted Must repayment be prorated or capped? Required When the ban took effect 2026-01-01 Safest way to structure it Avoid repayment; if used, fit the strict § 16608 sign-on carve-out (separate agreement, five-business-day counsel window, no interest, prorated over at most two years, defer option, and repayment only after a voluntary quit or a termination for misconduct). Upcoming changes — Read the full California guide
	Limited	No stay-or-pay statute, but an employer cannot claw back compensation that has already vested; structure it as a forfeitable bonus earned only on continued service.	N.Y. Lab. Law § 193. Matter of William Mattar, P.C. v. Riley, 2025 NY Slip Op 02680.	Jun 30, 2026
Claw back pay already earned? No Take it out of the final paycheck? Not allowed A statute limiting stay-or-pay? None Training/tuition repayment treated differently? Same as bonuses Must repayment be prorated or capped? Unclear When the ban took effect — Safest way to structure it Make the bonus unearned until a continued-service condition is met (forfeiture, not clawback); never recover already-vested pay. Upcoming changes — Read the full New York guide
	Generally enforceable	Repayment terms are enforced as ordinary contracts; ordinary contract defenses, public policy, the penalty rule, and the Payday Law’s deduction restrictions remain relevant.	Tex. Lab. Code § 61.018. Tex. Lab. Code § 61.001(7). FPL Energy, LLC v. TXU Portfolio Mgmt. Co., 426 S.W.3d 59 (Tex. 2014).	Sep 10, 2026
Claw back pay already earned? Unsettled Take it out of the final paycheck? Written consent (see guide) A statute limiting stay-or-pay? None Training/tuition repayment treated differently? Same as bonuses Must repayment be prorated or capped? No When the ban took effect — Safest way to structure it A documented, supportable repayment balance is not a safe harbor; final-pay deductions separately require a court order, statutory authority, or written employee authorization for a lawful purpose. Upcoming changes — Read the full Texas guide