New York Trapped at Work Act restricts certain 'stay-or-pay' repayment provisions for employees

At a glance

• New York’s Trapped at Work Act prohibits employers from requiring employees or prospective employees, as a condition of employment, to execute an 'employment promissory note'.

• An 'employment promissory note' is broadly defined as any agreement requiring an employee to pay a sum of money to an employer or the employer’s agent or assignee if the employment relationship terminates before a stated period.

• The law contains carve-outs for certain tuition, property, bonus, relocation, sabbatical, and collectively bargained arrangements, provided certain conditions are met.

• After originally going into effect on December 19, 2025, a subsequent amendment delayed the law’s effective date until December 19, 2026.

New York’s Trapped at Work Act, enacted as an amendment to the New York Labor Law, restricts so-called 'stay-or-pay' agreements that require employees to repay sums to an employer if their employment terminates before a stated period.

Specifically, the law prohibits employers from requiring, as a condition of employment, that an employee or prospective employee execute an 'employment promissory note', defined as 'any instrument, agreement, or contract provision requiring an employee to pay the employer, or the employer’s agent or assignee, a sum of money if the employee’s employment relationship with a specific employer terminates before a stated period'.

The law includes an express carve-out for repayment of a financial bonus, relocation assistance, or other noneducational incentive, payment, or benefit that is not tied to specific job performance. However, the carve-out may not apply if the employee was terminated by the employer for any reason other than misconduct or if the duties or requirements of the position were misrepresented to the employee. As a result, clawback provisions for sign-on bonuses may remain permissible in certain instances.

The law also includes express carve-outs for certain tuition payments, property sold or leased by the employer to the employee, certain sabbaticals, and collectively bargained programs.

While the law does not create a private right of action, employees who successfully defend against an employer’s action to enforce an agreement prohibited by the law may recover attorneys’ fees. In addition, New York’s Commissioner of Labor may impose civil penalties of USD1,000 to USD5,000 per affected employee.

Before the law’s December 19, 2026 effective date, employers may wish to review sign-on bonuses, relocation payments, tuition reimbursement, training repayments, and other repayment agreements that could be affected by the new legislation.