On December 29, 2025, Governor Kathy Hochul signed into law the “Trapped at Work Act,” signaling New York State’s firm stance against employment arrangements that financially penalize workers for leaving a job. The law took effect immediately and includes steep civil penalties of up to $5,000 per affected employee. Therefore, it is important that employers understand the law’s impact on “stay-or-pay” arrangements.
The Trapped at Work Act amends the New York Labor Law to prohibit employers from requiring, as a condition of employment, that an employee sign a promissory note or other “training reimbursement agreement.” This includes sign-on bonuses and other forgivable loans and incentives that require repayment of advances if an employee resigns before a certain date or length of employment. As this Act renders any such arrangement unenforceable, it also prohibits recovery on promissory notes and agreements that were entered into before the Act’s effective date.
Not every repayment obligation tied to employment is prohibited under the Act. Key exclusions include:
- Pay advances that are not tied to an employee’s training.
- Agreements that require an employee to pay for any property that was sold or leased to such employee.
- Arrangements with educational personnel with respect to terms and conditions of a sabbatical leave granted by the employer.
- Programs entered into by an employer with workers’ collective bargaining representative.
As Governor Hochul has indicated that further amendments may be required to clarify the scope of the Act, employers should keep an eye out for future guidance. In the meantime, employers must be careful to avoid “stay-or-pay” arrangements and training-related repayment agreements. In doing so, it is important that employers capture the nature of their pay advance arrangements with employees (such as tuition reimbursement programs) in a clear, written agreement.
If you have any questions about the new Trapped At Work Act, please reach out to us.