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Raphael Moore is general counsel for the Veterinary Information Network.

Large signing and retention bonuses have become common in veterinary medicine. For a new graduate carrying student debt or an experienced veterinarian considering a move, a bonus can make a job offer feel much more workable. The extra money can help with relocation, licensing costs, rent, loan payments or any number of expenses. In many contracts, the bonus is not just a reward for signing; it is also a tool to encourage the veterinarian to stay for a set period.

But what if, after accepting the position and bonus, the job doesn't work out?

A veterinarian may discover that the promised mentorship is thin, the caseload is unsafe, the schedule differs from what was discussed or the culture is a poor fit. At that point, the biggest question is practical: Can the employer make me pay back the bonus?

For California veterinarians, a new law now in effect, AB 692, suggests maybe not. In certain agreements entered into on or after Jan. 1, 2026, the law limits when an employer can require that bonuses be repaid.

California is part of a growing state-level move against "stay or pay" arrangements. AB 692 has a wide scope, applying broadly to employment-related repayment terms triggered by the end of employment. This article focuses more narrowly on one common version of those terms that is especially relevant for veterinarians: an upfront signing bonus or similar type of payment that the employer may try to claw back if the veterinarian leaves before a set date.

Under the law, which took effect Jan. 1, 2026, employers can still give signing bonuses up front, but they can attach repayment strings only if the following criteria are met:

• The repayment terms are in a separate agreement from the main employment contract.
• The employee is told they have the right to consult an attorney.
• The employee is given at least five business days to seek that advice before signing.
• Repayment is interest-free.
• Repayment is prorated.
• The retention period does not exceed two years.
• The employee has the option to defer the payment until the end of the retention period, with no repayment obligation.
• Repayment might be required only if early separation is at the employee's sole election or if the employer terminates the employee for misconduct.

This last requirement is pivotal, and the word "misconduct" matters. It is a specific legal concept under AB 692, not just a label an employer can apply to any termination (more on that below).

To summarize, there are three "bonus buckets" under California law:

• Bonus with no repayment obligation: still allowed.
• Bonus with a repayment obligation that satisfies AB 692: potentially enforceable, depending on why employment ended.
• Bonus with a repayment obligation that does not satisfy AB 692: The bonus itself is still allowed, but the employer may not be able to enforce the repayment obligation.

To whom does the law apply?

The provisions of AB 692 are clearest for veterinarians who work in California, especially those who primarily live and work in the state. The law can apply even if the employer is based outside California, because the focus is on the California work relationship, not where the employer is headquartered.

The harder question is the reverse situation, where a California-based employer hires a veterinarian who works entirely outside the state. The new law does not clearly say whether its provisions extend to that arrangement. In that situation, the answer might depend on where the veterinarian works, where the employer is based, where the agreement was made, where any dispute arises and whether there are enough California connections for AB 692 to apply. For veterinarians working outside California, the same questions might also be governed by the law of the state where they work.

An agreement's label isn't the deciding factor

Employers might use different words for similar types of payments. One agreement might call it a "signing bonus." Others might use the terms "relocation payment," "retention bonus," "advance," "incentive" or "forgivable loan."

The name matters less than what the agreement does. If the agreement says, in substance, "We are paying you money, and if your employment ends too soon, you must pay some or all of it back," the new law might apply.

A signing bonus is usually the clearest example. If it is paid at the start of employment and is not tied to production or job performance, repayment should be allowed only if the agreement satisfies AB 692.

Relocation repayment terms should be reviewed the same way. Is the money owed back if employment ends before a set date? If repayment is tied to the veterinarian leaving the job, the arrangement might come under AB 692.

A retention bonus paid at hiring might look similar to a signing bonus if it is paid at the start of employment and is not tied to specific job performance. A retention bonus offered later, after the veterinarian is already employed, is more uncertain. AB 692 clearly addresses certain upfront payments made at the outset of employment, but it does not clearly explain how later retention bonuses should be treated. If repayment is tied to the veterinarian leaving the job, the issue should be reviewed carefully.

Bonuses given for production or performance are altogether different. If a bonus has already been earned based on production, revenue, shifts or other performance metrics, the employer should not be able to turn it into something repayable simply because employment later ends.

AB 692 also addresses agreements where an employer pays for education or training and then requires repayment if the employee leaves. Those rules are different from the signing bonus rules. The focus of this article is signing bonuses and similar upfront payments, so I won't go into the details of the training and tuition repayment arrangements.

In any case, a simple practical rule of thumb is: If a repayment obligation is triggered by leaving the job, read the agreement carefully before signing.

Ways employment can end

I tend to think about employment ending in one of four ways:

• for cause by the employer;
• for cause by the employee;
• at will by the employer; and
• at will by the employee.

AB 692 asks not only whether the veterinarian left before the end of the bonus period, it asks why the job ended.

If the employer terminates the veterinarian for cause, they might be able to collect repayment, but only if the conduct qualifies as misconduct and the agreement otherwise satisfies AB 692. In plain English, misconduct means more than "this did not work out."

If the veterinarian resigns for cause, whether they are obligated to repay their employer is doubtful. For example, a veterinarian might leave because the employer promised mentorship but provided none, assigned unsafe caseloads, changed core terms, pressured the veterinarian to practice below acceptable standards or created working conditions materially different from what was promised. In that situation, the veterinarian has a strong argument that the separation was not solely their choice. They might have taken the action to resign, but the employer's conduct caused the resignation.

If the employer ends employment at will, generally, they should be unable to obtain repayment. For example, the hospital may decide the veterinarian is not a fit, patient volume may be down, the location may be overstaffed or the employer may simply choose to end the relationship. Those may be lawful reasons to end employment, but they are not necessarily misconduct by the veterinarian.

Finally, if the veterinarian leaves at will, repayment is most likely to be allowed, assuming the agreement satisfies AB 692. Reasons for leaving in this case might include taking a better job, relocating for personal reasons or disliking the commute.

One weakness in the law

AB 692 does not clearly say what happens if the employer fails to deliver on important promises. For example, it does not expressly say: "If the employer promised mentorship, staffing, schedule, training, or support and then materially failed to provide it, the veterinarian does not have to repay the bonus."

That would have been helpful. Without that language, there may be disputes about whether the veterinarian's resignation was truly "at the employee's sole election." The veterinarian's argument usually will be stronger if the employer's promises were in writing. If mentorship, schedule, caseload expectations, training or support were part of the deal, those terms should be documented in the offer letter, employment agreement or a written addendum. If the employer later fails to deliver on material promises, the veterinarian should be able to point to something concrete and say, "I did not leave simply because I changed my mind. I left because the job I was promised is not the job I was given."

What counts as misconduct?

AB 692 does not let an employer demand repayment just by saying the veterinarian was fired "for cause." The law uses the word "misconduct," and it ties that word to state unemployment law. In plain terms, misconduct generally means serious work-related wrongdoing, not ordinary poor performance or a job that simply did not work out.

Under California unemployment regulations, misconduct occurs when an employee substantially breaches or willfully or wantonly disregards their material duty to the employer, causing harm or likely harm to the employer's interests. The same regulations say that mere inefficiency, unsatisfactory conduct, inability, incapacity, isolated ordinary negligence and good-faith errors in judgment generally are not misconduct.

That matters because if the employer ends the relationship for something that is not misconduct, the employer should not be able to demand repayment of a signing bonus.

Examples that generally should not, by themselves, be treated as misconduct, and therefore generally should not support a repayment demand if the employer terminates the veterinarian, include:

• A new graduate takes more time per appointment than expected.
• A veterinarian needs more support than the employer anticipated.
• A veterinarian struggles to meet production goals.
• A veterinarian makes an isolated documentation mistake.
• A veterinarian makes a reasonable clinical decision that management disagrees with.

Examples that might be considered misconduct, and therefore may support repayment if the agreement otherwise satisfies AB 692, include:

• knowingly falsifying medical records;
• diverting controlled substances;
• ignoring written safety rules after repeated warnings;
• intentionally abandoning a patient; and
• deliberately violating clear legal or ethical requirements.

The deferral option: cash now or safety later

AB 692 does not require every bonus to include a deferral option. The deferral option matters when the employer wants the right to demand repayment if employment ends early. In that situation, the agreement must give the veterinarian the option to defer receiving the bonus until the end of the retention period, with no repayment obligation.

That choice matters because repayment is a cash-flow issue, not just a contract issue.

A signing bonus is usually taxable in the year that it's received or made available. When taxes are withheld, the take-home portion of the bonus will be reduced. If the employer later demands repayment, the demand often will be based on the gross or prorated gross amount, even though the veterinarian already paid taxes on the money.

If repayment happens in a subsequent tax year, the tax handling can be complicated. The IRS says that if a taxpayer repays an amount included in income in an earlier year, they may be able to deduct the repayment in the repayment year, or, if the repayment exceeds $3,000, they might be able to take a tax credit. That might help later, but it does not solve the immediate cash problem.

There are pros and cons to deferring and not deferring and also ways to mitigate the cons.

• Defer. That avoids the repayment problem if the veterinarian leaves before the end of the retention period, and it may reduce tax and cash-flow friction. The tradeoff is that the veterinarian does not have immediate access to the money and does not earn interest or investment income on it during the waiting period.
• Take the bonus up front. Having to repay it is a risk, but a recipient could ease the risk by not spending it. Instead, they could place the money in a separate high-yield savings or similarly stable account. Then, if they complete the retention period, they keep the bonus plus interest earnings. And if the job ends early and they must repay the bonus, the funds are available.

California is not alone

Other states have laws related to bonuses, some with similar and some with different approaches. New York has adopted a similar framework (though its operative date was delayed) for financial bonuses, relocation assistance and other noneducational incentives that are not tied to specific job performance. Indiana has a physician-specific rule that limits certain bonus and repayment obligations for physicians employed by hospitals or related entities. Colorado and Wyoming have focused more on training, education, relocation expenses and noncompete-related repayment restrictions.

Overall, legislatures are becoming more skeptical of repayment terms that operate like financial handcuffs. That does not mean bonuses are going away. Signing bonuses can be legitimate and helpful to both parties. Veterinary employers compete for doctors in a difficult hiring market. A bonus can help a veterinarian move, start work, manage debt or choose among multiple practices that are otherwise a strong fit. Employers also have a real interest in stability after recruiting, onboarding and supporting a new doctor.

The problem is with repayment terms that are too rigid, too expensive or too hard to manage. California's new law is a step in the right direction. The goal is making the strings attached to bonuses fair, understandable and tied to a real bargain that both sides can defend.

Raphael Moore, JD, LLM, has been general counsel of the Veterinary Information Network, an online community for the profession, since the 1990s. He enjoys figuring out esoteric legal issues and is a frequent contributor to VIN legal and practice management message board discussions. An avid hiker, he has a knack for being attacked by bears in Yosemite. He lives with his wife and their two daughters in a geodesic dome on the outskirts of Davis, California, where he raises alpacas, goats and chickens.