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As discussed in our previous Alert, a bill recently signed into law by New York Governor Hochul and now in effect prohibits certain "stay or pay" agreements that require employees to repay their employer for training costs if the employee resigns before a specified period. As mentioned previously, however, there are some ambiguities with the new law, including, for example, where training costs might also be characterized as tuition assistance programs.
The Governor has reportedly reached an agreement with the Legislature to resolve some of these ambiguities in the next legislative session. The currently proposed amendments to the new law include the following:
- Changing the effective date of the "Trapped at Work Act" to December 19, 2026.
- Clarification that tuition repayment agreements are permissible if the education credential is not a condition of employment; the amount is based upon the employer's actual cost, is clearly disclosed and capped; the employee's repayment obligation is prorated with no acceleration for repayment or payment required upon termination of employment, except if termination was for misconduct.
See https://assembly.state.ny.us/leg/?default_fld=%0D%0A&leg_video=&bn=A09452&term=2025&Text=Y. We will keep you updated about when, if at all, any such amendments are made to the existing law. In the interim, requiring departing employees to pay for their training costs is potentially illegal.
The Bottom Line
Accordingly, New York employers should review and, where necessary, revise offer letters, employment agreements, or any other agreements between the employer and employees that may include repayment terms. We note that the statute's language does not expressly grandfather existing agreements so employers would be prudent to assume that the new law might apply retroactively until the courts make a determination.
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