New York State and City Legislative Update: Changes for All Employers in 2025 and 2026

Takeaways

• Effective immediately: New bar on New York State employers’ requiring “employment promissory notes” as a condition of employment. Also, an amendment to the New York State Human Rights Law clarifies that an actual or predictable adverse effect of an employer’s practice, regardless of intent, suffices as a prima facie showing of unlawful discrimination.
• Effective 2.22.26: Changes to the New York City Earned Sick and Safe Time and Temporary Schedule Changes Acts.
• Finally, effective 4.18.26: New restrictions to New York State employers’ ability to request or use consumer credit histories for employment purposes.

Related links

• Assembly Bill 692: California Passes Prohibition Against Workers Contracting to Repay Debts
• “Restoring Equality of Opportunity and Meritocracy” EO
• NYS Senate Bill S4070; NYS Senate Bill S3072; NYS Senate Bill S8338
• NYS Senate Bill S7388
• Gov. Hochul Veto Memo
• New York City Adopts New Pay Data Reporting Requirements after Veto Override
• NYC Employer Obligation Changes: Amendments to Increase Earned Safe and Sick Time Act + Reduce Temporary Schedule Change Act Requirements

Article

The New York State Assembly and Senate passed numerous pieces of legislation during the concluded legislative session in late December. This article reviews three enactments signed by Gov. Kathy Hochul into law and one bill she vetoed.

Trapped at Work Act

On Dec. 19, 2025, Gov. Hochul signed S4070, the “Trapped at Work Act,” adding new article 37 to the New York Labor Law, codified as Labor Law §§1050-1055. The law became effective “immediately” upon signing.

Employers are prohibited from requiring “employment promissory notes” as a condition of employment. §1052(1). “Employment promissory notes” is defined as any instrument, agreement, or contract provision that requires a worker to pay the employer a sum of money if the employee leaves employment before the passage of a stated period of time. An “employment promissory note” expressly includes any such document that states payment of monies constitutes reimbursement for training provided to the worker by the employer or by a third party.

Section 1052(2) contains important exceptions to the prohibition. The following agreements are permissible:

(a)    Agreements requiring the worker to repay the employer for sums advanced to the worker, unless such sums were advanced to pay for training related to the employment.

(b)    Agreements requiring the worker to pay the employer for any property sold or leased to the worker.

(c)    Agreements requiring educational personnel to comply with the terms of sabbatical leaves.

(d)    Agreements entered into as part of a program agreed by the worker’s collective bargaining representative.

The law does not provide a private right of action. However, if an employee successfully defends a lawsuit brought by the employer to enforce a promissory note made void by the law, the employee can recover attorneys’ fees. Further, violations of the law can subject the employer to fines of not less than $1,000, but not more than $5,000, for each violation.

Although the New York law is leaner than its California counterpart, it is no less confusing. Repayment of sign-on bonuses and retention bonuses appear to be permitted by the statute’s carve-out. The statute is silent about forfeiture or clawback of incentive compensation or restricted stock plans. That the statute appears to prohibit repayment of training costs agreements is unsurprising and consistent with certain New York case law construing such provisions as non-competition agreements.

NYS Credit Check Limitations

In 2026, New York State will join New York City and significantly restrict employers from requesting or using the consumer credit histories of applicants or employees for employment purposes. S3072 becomes effective on April 18, 2026.

The enactment defines “consumer credit history” to include written and other information obtained through consumer credit reports or credit scores, or other information obtained directly from the applicant or employee: (i) detailing credit accounts or (ii) bankruptcies, liens or judgments. Consumer credit reports include any communication by a consumer reporting agency bearing on an individual’s creditworthiness, credit standing, credit capacity, or credit history.

The law permits employers to request and consider the consumer credit history information of applicants and employees in certain, limited circumstances, as well as in response to any lawful subpoena, court order, or law enforcement investigation. Narrow exemptions to the new prohibition include:

• Positions for which employers are required by law, regulation, or a self-regulatory organization to use an individual’s consumer credit history for employment purposes;
   
• Peace officers or police officers as defined by law, or in a position with a law enforcement or investigative function in a law enforcement agency;
   
• Position subject to background investigation by State agency, narrowly limited to appointed positions with a high degree of trust;
   
• Positions that require the employee to be bonded under state, agency, or federal law;
   
• Positions requiring a security clearance under federal or any state law;
   
• Non-clerical positions that entail regular access to trade secrets or national security information;
   
• Positions with signatory authority over third-party funds or assets valued at $10,000 or more, or positions that involve a fiduciary responsibility to the employer with the signatory authority over third-party funds or assets valued at $10,000 or more on behalf of the employer; or 
   
• Positions with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of networks or databases of the employer or the employer’s client.

Codification of Disparate Impact into NYSHRL

Gov. Hochul signed S8338, which took effect immediately on Dec. 19, 2025. The bill amends the New York State Human Rights Law (NYSHRL) by codifying the disparate impact theory of discrimination.

The new law establishes that “an unlawful discriminatory practice may be established by a practice’s discriminatory effect, even if such practice was not motivated by a discriminatory intent.” Executive Law § 296(5-a)(a). This means that, if a practice has a discriminatory effect where it actually or predictably results in an adverse employment action against a protected group or person, absent any intent by the employer, a showing of this practice’s discriminatory effect is enough to preliminarily establish unlawful discrimination. See Executive Law § 296(5-a)(b).

As the new law took effect immediately at signing, the law applies to all cases alleging employment discrimination occurring on or after Dec. 19, 2025. The bill does not specify whether the law applies to pending and unfiled claims that accrued prior to Dec. 19, 2025, but are still within the NYSHRL’s statute of limitations.

Although the codification of disparate impact puts NYSHRL in sync, at least on paper, with Title VII of the Civil Rights Act of 1964, the new law is contrary to the Trump Administration current position. On April 23, 2025, President Trump signed an executive order directing the Equal Employment Opportunity Commission (EEOC) and other federal agencies to cease their pursuit of disparate impact claims in pending and future proceedings brought under Title VII. The new NYSHRL amendment provides a clear alternative state-level path for claims that could have been brought before the EEOC.

Vetoed New York Labor Law Amendment

Gov. Hochul vetoed bill S7388, “Remedial Construction of New York Labor Law Act,” an act to amend the Labor Law. The proposed legislation contained sweeping language that would have required a liberal construction of the Labor Law. It would have required the courts to interpret the Labor Law more favorably for workers than for employers (“[The Labor Law] shall be construed liberally for the accomplishment of the remedial purposes thereof …”).

Moreover, the bill attempted to establish a unique stature for the Labor Law independent of how similarly worded provisions are interpreted under the Fair Labor Standards Act and other federal laws (“[The Labor Law] shall be construed liberally for the … remedial purposes thereof, regardless of whether federal labor laws, including but not limited to Fair Labor Standards Act … and other laws with provisions worded comparably ….”).

While acknowledging that specific provisions of the Labor Law are being misinterpreted to better protect workers, Gov. Hochul noted in the veto memo that the amended language is a “vague and sweeping statutory mandate” that would have put “a thumb on the scale” in favor of workers.

NYC: New Pay Equity Reporting, Upcoming Changes to ESTA

On Oct. 9, 2025, the New York City Council approved amendments to local laws that would impose new pay equity reporting obligations on certain private employers and require the city to conduct annual pay equity studies.

On Nov. 7, 2025, Mayor Eric Adams vetoed the law. On Dec. 4, 2025, however, the New York City Council voted to override Mayor Adams’ veto, enacting new local laws that significantly expand pay transparency obligations for private employers. (See New York City Adopts New Pay Data Reporting Requirements after Veto Override.)

Proposed amendments to employers’ pay transparency obligations related to advertisements that would have expanded disclosure obligations did not come up for vote. They will need to be reintroduced next year.

On and after Feb. 22, 2026, changes are coming to the New York City Earned Sick and Safe Time and Temporary Schedule Changes Acts. (See NYC Employer Obligation Changes: Amendments to Increase Earned Safe and Sick Time Act + Reduce Temporary Schedule Change Act Requirements.)

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New York State employers should review policies and practices to ensure compliance with these developments. Please contact a Jackson Lewis attorney with any questions.