NY Trapped at Work Act: Readying Employer Repayment Agreements for Dec. 19

Takeaways

• The New York “Trapped at Work Act” bars employers from requiring employees to enter into “employment promissory notes” as a condition of employment. 
• Out of caution, employers should treat 12.19.26 as the compliance date for agreements executed on or after that date. The Act is silent on whether it applies retroactively.
• Agreements that do not fit one of the amendment’s carve-outs, including certain tuition repayment agreements and “stay-or-pay” provisions, will be void; and employers may face penalties. 
• Employers should review their repayment programs and agreements now.

Related links

• NY Trapped at Work Act’s Narrowed Scope + Delay: Impact on Employer Repayment Agreements
• New York State and City Legislative Update: Changes for All Employers in 2025 and 2026
• New York A9452

Article

Gov. Kathy Hochul signed the New York “Trapped at Work Act” on Dec. 19, 2025, and it was swiftly amended (A9452) on Feb. 13, 2026. The amendments narrowed the law’s scope and changed when it takes effect. (For a detailed discussion of the amendment, see NY Trapped at Work Act’s Narrowed Scope + Delay: Impact on Employer Repayment Agreements.) With the compliance deadline potentially as early as Dec. 19, 2026, New York employers should shift now from monitoring the law to implementing compliance measures.

The New York State Department of Labor (NYSDOL) is expected to issue further guidance before or shortly after the effective date; however, as of this writing, none has been issued.

When Does the Act Take Effect?

As originally enacted, the Act took effect immediately. A9452 amended the Act and replaced the effectiveness language with a provision stating that the Act takes effect “one year after it shall have become a law.” The statute does not set a specific date, so it can be read as either Dec. 19, 2026, one year after the original Act was signed, or Feb. 13, 2027, one year after the amendment was signed.

Until the legislature or NYSDOL clarifies the point, employers should take the more conservative approach and treat Dec. 19, 2026, as the compliance date.

As the Act is silent on whether it applies retroactively to agreements executed before the effective date, employers could expect challenges to agreements executed prior to the effective date. Hopefully, the NYSDOL will issue clarifying guidance that the restrictions only apply to agreements executed on or after the effective date.

What the Law Prohibits

The Act applies to “employees,” defined as “any person employed for hire by an employer in any employment.”

It prohibits requiring “employment promissory notes” as a condition of employment.

An employment promissory note is any instrument, agreement, or contract provision that requires an employee to pay the employer a sum of money if the employee leaves before a stated period of time.

What Remains Permissible

The amended Act allows the following:

1. Tuition and other costs for transferable credentials. Employers can seek repayment of tuition, fees, and required educational materials for a “transferable credential” if the agreement does all of the following:

• It is a written contract offered separately from the employment contract.
• It does not make obtaining the credential a condition of employment.
• It states the repayment amount in advance, and that amount does not exceed the employer’s actual cost.
• It prorates repayment over the required employment period and does not speed up payment when the employee separates.
• It requires no repayment if the employee is terminated, except for misconduct.

Employer-specific or non-transferable training, and mandated safety and compliance training, do not count as transferable credentials.

2. Bonuses, relocation assistance, and other non-educational incentives. Employers can require repayment of payments or benefits that are not tied to specific job performance. Repayment, however, is not allowed if the employee was terminated by the employer for any reason other than misconduct or if the job’s duties or requirements were misrepresented to the employee.

3. Voluntary sales or leases of property to the employee.

4. Sabbatical leave agreements for educational personnel.

5. Programs agreed to by a collective bargaining representative.

Enforcement Exposure

The Act does not create a private right of action. Instead, employees can file complaints with the commissioner of labor. The commissioner can impose penalties of $1,000 to $5,000 per violation, considering:

• The employer’s size;
• The employer’s good faith;
• The seriousness of the violation; and
• Any history of prior violations.

An employee who successfully defends against an employer’s lawsuit to enforce a void promissory note can recover attorney’s fees.

Compliance Steps Before Dec. 19, 2026

Employers with New York employees should consider the following:

1. Inventory repayment provisions. Look for repayment programs and related employee obligations wherever they appear, including: 

• Offer letters and employment agreements;
• Tuition assistance and training policies;
• Sign-on, retention, and relocation agreements; and
• Incentive and equity plan documents.

2. Separate tuition repayment agreements. Any repayment agreement for a transferable credential must be a stand-alone written contract, not a provision inside the employment agreement.

3. Check training categories. Review any training programs or credentials that carry repayment obligations and remove those obligations for any program that is not a “transferable credential.”

4. Revise repayment mechanics. Make sure tuition repayment is prorated, capped at the actual cost, stated in advance, and not accelerated when the employee separates.

5. Update termination triggers. Repayment provisions for bonuses, relocation, and tuition generally should apply only to voluntary resignations or terminations for misconduct. Consider adding a definition of “misconduct” to agreements.

6. Review recruiting materials. Bonus and relocation clawbacks are not available if the job’s duties or requirements were misrepresented. Ensure job descriptions and offer communications are accurate.

7. Roll out compliant forms for agreements entered into on or after Dec. 19, 2026. Coordinate any changes with your multistate forms, including those subject to similar laws such as California’s prohibition against workers contracting to repay debts (AB 692, as recently amended by AB 1697, which will go into effect on Jan. 1, 2027). For more information on these updates, please see our article California: Stay-or-Pay Agreements, Automated Decisions, Family Leave and Other Employment Law Changes for 2027 + Beyond.

8. Train HR and hiring managers on the new rules for offering and enforcing repayment agreements.

* * *

Jackson Lewis attorneys are available to answer inquiries regarding this and other workplace developments.