As described in our January Legal Update, on December 19, 2025, New York Governor Kathy Hochul signed the Trapped at Work Act into law, making New York one of the growing number of states to enact legislation limiting “stay-or-pay” clauses in employment agreements. On February 13, 2026, Governor Hochul signed important amendments to the law. New York employers should note the changes and evaluate whether existing employment agreements comply with the amended law.
New York Trapped at Work Act
The Trapped at Work Act, which aims to combat “stay-or-pay” clauses in employment agreements, originally went into effect on December 19, 2025. The Act declares unenforceable “employment promissory notes”—i.e., any instruments, agreements, or contractual provisions requiring repayment of a sum of money to an employer if the employment relationship ends before a specific time. For additional background on the Act prior to amendment, see our January Legal Update.
Recent Amendments to the Trapped at Work Act
The Act’s effective date is now February 13, 2027—one year after the amendments were signed into law. This gives employers additional time to review their employment agreements and consider alternatives to “stay-or-pay” clauses.
The key provisions of the Act, as amended, are as follows:
- Application to Employers: The Trapped at Work Act applies to all New York employers, regardless of size. The amendments exclude the government and organized groups from the definition of “employer.”
- Limited to Employees: The Act originally applied to agreements with employees, independent contractors, interns, externs, and volunteers. As amended, the Act only applies to “employees,” and does not extend to independent contractors, interns, externs, or volunteers.
- Applies to all Terminations of Employment: The Act as amended clarifies that it applies to all “stay-or-pay” clauses that require repayment when the employment relationship terminates for any reason.
- Narrowed Exemption for Transferable Credential Reimbursement Agreements: The Act originally permitted “stay-or-pay” clauses that require an employee to repay to the employer “any sums advanced to such worker by the employer, unless such sums were used to pay for training related to the worker’s employment with the employer.” The amendments to the Act eliminate this exemption and replace it with a narrower provision permitting “stay-or-pay” clauses that require an employee to reimburse the employer for “the cost of tuition, fees, and required educational materials for a transferable credential” that meets certain requirements.
- A “transferable credential” is defined as “any degree, diploma, license, certificate, or documented evidence of skill proficiency or course completion that is widely recognized by employers in the relevant industry as a qualification for employment, independent of the employer’s specific business practices, or that provides skills or qualifications that demonstrably enhance the employee’s employability with other employers in the relevant industry.”
- A “transferable credential” does not include:
- “Employer-specific or non-transferable training,” which is defined as “(i) instruction regarding the employer’s proprietary processes, proprietary systems, internal policies, proprietary software, or proprietary equipment unique to the employer, or (ii) instruction that does not qualify the employee for a new occupational title, classification, or industry-recognized credential and instead consists of skillful variations of general processes known to the relevant trade or industry.”
- “Mandated safety and compliance training,” which is any training required by federal, state, or local law to maintain workplace safety, such as OSHA certifications, sexual harassment prevention, or diversity training.
- To be enforceable, a “stay-or-pay” requiring an employee to reimburse an employer for a transferable credential must satisfy all of the following requirements:
- The agreement is set forth in a written contract separate from any contract for employment;
- The agreement does not require the employee to obtain the transferable credential as a condition of employment;
- The agreement specifies the repayment amount, which does not exceed the cost owed to the employer, before the employee agrees to the contract;
- The agreement provides for a prorated repayment amount proportional to the total amount owed and the length of the required employment period and does not require accelerated payment if the employee separates from the employment; and
- The agreement does not require repayment to the employer if the employee is terminated for a reason other than misconduct.
- Certain Benefit Repayment Agreements Permitted: Pursuant to the amendments, an employer may require an employee to repay benefits not tied to job performance—such as bonuses and relocation assistance—“unless the employee was terminated for any reason other than misconduct or the duties or requirements of the job were misrepresented to the employee.” This is a significant change to the Act as originally enacted, as the most common types of repayment provisions are now permissible where an employee is terminated for misconduct. Employers should ensure that terminations for misconduct are appropriately documented, and consider alternative employee retention mechanisms other than “stay-or-pay” provisions that apply to employee terminations for reasons other than misconduct.
- Other Exempt Agreements: The Act exempts agreements requiring an employee to pay for property that the employer has sold or leased to the employee (as long as such sale or lease was voluntary), agreements requiring educational personnel to comply with terms or conditions of sabbatical leave, and agreements that are part of a collective bargaining agreement.
If an invalid “stay-or-pay” provision is part of a larger employment agreement, the invalidity of a “stay-or-pay” provision will not render unenforceable other portions of the employment agreement.
Violations of the Trapped at Work Act carry fines ranging from $1,000 to $5,000 per violation. Pursuant to the amendments, an aggrieved employee or prospective employee may file a complaint with the Labor Commissioner, who may consider the following factors when deciding the penalty amount: the size of the employer’s business, the employer’s good-faith basis for believing its conduct was in compliance with the Act, the gravity of the violation, and any history of previous violations. While no private right of action exists under the Act, an employee who successfully defends against their employer’s attempts to enforce a void “stay-or-pay” agreement may recover attorneys’ fees.
Key Takeaways for Employers
- Employers now have until February 13, 2027 to ensure employment agreements, offer letters, training agreements, reimbursement agreements, and promissory notes comply with the Trapped at Work Act, as amended.
- Employers should ensure that any transferable credential reimbursement provisions satisfy the statutory requirements to qualify for an exemption from the Act.
- Employers should consider alternative employee retention mechanisms, such as deferred compensation, employee stock options, and retention bonuses.
- Employers should update their policies or programs regarding reimbursement for education and training outside the workplace, to ensure compliance with the Act as amended.
- Employers should continue to monitor for updates to state legislation on “stay-or-pay” provisions in New York and other states where employees are located.
