New York State's Trapped At Work Act Takes Effect

Companies in New York State must review their agreements with their workers to comply with new rules concerning "pay or stay" agreements. Specifically, New York's Trapped At Work Act bans companies from requiring workers to pay companies if they leave their job within a specified timeframe. The Act was signed by Governor Hochul on December 19, 2025, and took effect immediately.

Prohibition

Companies are prohibited from compelling workers to enter into "employer promissory notes" as a condition of their jobs. The Act defines "employer promissory notes" as any agreement requiring workers to pay a sum of money if the worker leaves the job before the passage of a stated period of timed. The Act explicitly includes training reimbursement agreements within this definition but does not limit its scope to such arrangements. All such agreements deemed to be employer promissory notes are void and unenforceable pursuant to the Act.

Who is Covered

The Act's definition of employer is broad, encompassing individuals and entities (including subsidiaries and contractors) that hire or contract "with a worker to work for the employer." Furthermore, the Act's protections extend to independent contractors, externs, interns, volunteers, apprentices, sole proprietors and individuals performing services for the employer as well.

The Act provides certain limited exceptions:

• Requirement of the worker to repay any sums advanced to such worker, unless such sums were used to pay for training related to the worker's work;
• Payment to the employer for property sold or leased to the employee;
• Requiring educational personnel from complying with the terms and conditions of sabbatical leave; or
• Agreements entered into as part of a collective bargaining agreement.

Proposed Amendments

Due to the Act's ambiguity (i.e., whether it applies to tuition reimbursement, moving reimbursement, or repayment of bonuses unrelated to performance) proposed amendments (the "Bill") to the Act were introduced in the New York State assembly on January 6, 2026. These included:

• Postponing the effective date of the Act to December 19, 2026, to provide employers time to comply with the statute;
• Narrowing the definition of "employer" to "any person, corporation, limited liability company, or association employing any individual in any occupation industry, trade, business or service including the statute and its political subdivisions";
• Limiting the Act's application from agreements with "workers" to agreements with "employees" which the Bill defines as "any person employed for hire by an employer in any employment";
• Deleting the specific example of contracts requiring reimbursement for training provided from the definition of "employer promissory note";
• Incorporating an exception for tuition reimbursement if: (i) set forth in a written agreement separate from the employment contract; (ii) participation in the program is not a condition of employment; (iii) the repayment amount is specified in the agreement before it is agreed to by the employee and does not exceed the cost to the employer; (iv) the repayment period is prorated over a period of time and does not accelerate upon the employee's separation of employment; and (v) repayment is not required if the employee is terminated, unless they are fired for misconduct; and
• Adding exceptions for agreements requiring employees to repay payments for relocation assistance and bonuses and other non-educational incentive payments not tied to job performance, "unless the employee was terminated for any reason other than misconduct or the duties or the requirements of the job were misrepresented to the employee."

Next Steps

Notwithstanding the proposed amendments, the Act is in effect as is. Although it is unclear at this point, based on the issues addressed by the proposed amendments, agreements requiring tuition reimbursement, relocation expense reimbursement, or repayment for bonuses unrelated to performance (e.g. signing bonuses) may very well be prohibited under the current version of the Act. It is also unclear whether the Act will take retroactive effect. However, companies are subject to a fine of up to $5,000 for each prohibited employer promissory note they seek to have signed by or enforced against a worker or prospective worker. Moreover, workers sued by an employer seeking enforcement of any employer promissory note prohibited by the Act are entitled to attorneys' fees.

Similar legislation was recently passed in California and other jurisdictions have expanded restrictions concerning training repayment obligations.

As the Act took immediate effect upon signing, and the proposed amendments are not yet law, employers with operations in New York should:

• Review existing offer letters, personnel records and training acknowledgments for any repayment provisions;
• Revise training programs and incentives payments to comply with the obligations of the Act;
• Consider suspending collection efforts for training or bonus repayments; and
• Take into account relevant laws in other jurisdictions when crafting personnel policies.

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.