Last Updated on March 10, 2026 by MyHRConcierge

New York’s recently enacted Trapped at Work Act represents a significant shift in employment law, particularly in how employers may structure stay-or-pay and training repayment agreements. Signed into law by Governor Kathy Hochul on December 19, 2025, and codified as a new Article 37 of the New York Labor Law, this legislation addresses a long-standing concern about predatory contractual provisions that can financially bind workers to an employer.

Legal Update as of March 10, 2026

On February 13, 2026, Kathy Hochul signed a chapter amendment to the New York Trapped at Work Act that clarifies several provisions and delays the law’s implementation. The amendment delays the effective date to December 19, 2026, “one year after it shall have become law” rather than “immediately.” However, it remains unclear whether the amendments are intended to delay the law’s effective date until one year after they were signed, which would make the new effective date February 13, 2027.

The amendment also revises the definition of a “note” under the Act. The updated language clarifies what types of repayment obligations qualify as covered employment promissory notes, helping distinguish prohibited “stay-or-pay” arrangements from certain permissible agreements, such as qualifying educational assistance or similar benefit-related repayment provisions. This clarification is intended to provide employers with greater guidance on which types of agreements may fall within the law’s restrictions

This provision narrows the scope of the law to apply specifically to employees, rather than the broader category of “workers,” and provides additional clarification around permitted arrangements, including certain tuition reimbursement or educational assistance programs tied to transferable credentials.

What the Act Prohibits

At the core of the Trapped at Work Act is a prohibition on “employment promissory notes.” Under the statute, employers may no longer require a worker, as a condition of employment, to execute an agreement that obligates the worker to pay money back to the employer if they leave before a specified period of time.

An employment promissory note is broadly defined. It includes any instrument, agreement or contract provision that conditions employment on a payment obligation for early separation, including provisions framed as reimbursement for training provided by the employer or a third party.

This effectively targets what are commonly referred to as “stay-or-pay” clauses- contractual terms that require repayment of training costs or similar charges if a worker departs before a set tenure. 

Key Exceptions

While the Trapped at Work Act establishes a broad prohibition, Section 1052(2) outlines several important exceptions where repayment terms remain permissible:

1. Repayment of Non-Training Advances: Employers may require repayment of sums advanced to a worker, provided those sums were not used for training related to the worker’s employment.
   
2. Property Sold or Leased to Workers: Agreements that obligate a worker to pay for property sold or leased to them by the employer are not prohibited.
   
3. Sabbatical Agreements for Educational Personnel: Terms concerning sabbatical leaves granted to educational employees remain outside the ban.
   
4. Collective Bargaining Agreements: Repayment provisions included in programs agreed upon with a worker’s collective bargaining representative are exempt.
   

These exceptions reflect a legislative effort to balance worker protection with business needs and traditional employment practices.

Compliance and Enforcement

The Trapped at Work Act does not create a private right of action for workers. Instead, enforcement is handled by the New York State Department of Labor, which may assess civil penalties- no less than $1,000 but no more than $5,000 per violation- for each instance an employer requires or attempts to enforce a prohibited employment promissory note.

Additionally, workers who successfully defend against enforcement of an unlawful promissory note in court may be entitled to recover attorneys’ fees.

Impact on Employers

For employers operating in New York, or employers with New York-based workers, the Trapped at Work Act means that routine contractual provisions tied to retention incentives, training reimbursement and repayment obligations must be reviewed and, where necessary, redrafted or eliminated. Agreements that previously included training repayment clauses, retention bonuses with clawback provisions or similar terms may now be void under state law.

Human resources, legal and compliance teams should undertake a comprehensive audit of offer letters, employee agreements, independent contractor contracts, internship documentation and other engagement forms to ensure they do not inadvertently include prohibited clauses.

Looking Forward

The Trapped at Work Act marks a notable expansion of worker protections in New York. By banning traditional stay-or-pay arrangements and other repayment obligations tied to early departure, the law reflects a broader trend toward limiting predatory employment provisions. For businesses, proactive compliance and clear policy updates will be essential to avoid regulatory penalties and maintain competitive, legally sound workforce agreements.

For more information on how to enhance your organization’s compliance efforts, contact MyHRConcierge at 855-538-6947 ext.108, ccooley@myhrconcierge.com. Or, schedule a convenient consultation below: