- within Compliance and Consumer Protection topic(s)
Seyfarth Synopsis:
As we closed out 2025, Governor Kathy Hochul signed into law the New York "Trapped at Work Act," which amends the New York Labor Law by prohibiting employers from requiring "employment promissory notes" and similar stay‑or‑pay provisions as a condition of employment. The law took effect on December 19, 2025.
Background
Effective December 19, 2025, New York's Trapped at Work Act (the "Act") significantly restricts the use of stay‑or‑pay provisions in employment agreements. These provisions typically require an employee to repay certain costs—often framed as training, onboarding, or other employer expenditures—if the employee resigns before a specified date.
Importantly, the Act applies to "workers," a term defined more broadly than W‑2 employees. Under the statute, a "worker" includes not only traditional employees but also independent contractors, subcontractors, interns, externs, apprentices, volunteers, and other individuals who perform work or services for an employer, whether or not they are on the payroll. Because the definition sweeps in both employees and many non‑employee categories, the Act may apply to a wider range of agreements than employers traditionally consider in the onboarding context.
What the Act Prohibits
With limited exception, the Act prohibits employers from requiring, as a condition of employment, any "employment promissory note." The term is defined broadly to include any agreement, instrument, or contract provision that:
- requires the worker to pay the employer if the worker leaves before a particular time; or
- frames the required payment as reimbursement for training provided by the employer or a third party.
Accordingly, any clause conditioning continued employment on repayment of training‑related or onboarding‑related costs if the worker separates before a stated period is now unlawful.
Employers that violate the Act may face civil penalties of up to $5,000 per violation.
Although the Act does not create a stand‑alone private right of action, a worker who is sued by an employer attempting to enforce a prohibited agreement may recover the employee's attorneys' fees if the employee successfully defends against the claim.
Exceptions
The Act contains several narrow exceptions. The following categories of agreements are permitted:
- Repayment of sums advanced to a worker that are unrelated to training
- Payment for employer‑provided property sold or leased to the worker
- Sabbatical‑related agreements for educational personnel
- Requirements contained in collective bargaining agreements
These exceptions are limited, and employers should carefully evaluate any repayment provision to ensure it fits squarely within one of these categories.
Effective Date and Open Questions
The Act provides that, as of December 19, 2025:
"no employer may require, as a condition of employment, any worker or prospective worker to execute an employment promissory note."
Based on this language, the Act appears to apply only to agreements executed or entered into on or after December 19. However, it remains to be seen whether the New York State Department of Labor will attempt to enforce the Act in situations where an agreement was signed before December 19 but the employer seeks repayment or enforcement after that date.
The Act authorizes the New York State Department of Labor to promulgate rules and regulations, which are expected to provide additional interpretive guidance, including on issues such as scope, exceptions, and potential retroactive application.
What Employers Should Do Now
Employers should take immediate steps to ensure compliance:
- Review offer letters, onboarding documents, training acknowledgments, bonus agreements, and any other documents that may include stay‑or‑pay provisions.
- Remove or revise any repayment language that may qualify as a prohibited employment promissory note.
- Avoid enforcing existing repayment obligations until they are reviewed for consistency with the Act.
- Assess broader retention strategies, especially for multi‑state employers, given similar developments in California and other jurisdictions.
- Employers should be aware that on January 6, 2026, a New York Assembly member introduced Bill A09452, which would provide a series of amendments to the Act (including delaying the effective date to December 19, 2026) designed to address several concerns expressed by employers. For information related to those proposed amendments, see Seyfarth's legal update "Proposed Amendments to NY "Trapped at Work Act" May Ease Burden on Employers."
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.
