For information purposes only. Employers should consider seeking the assistance of experienced employment law attorneys before implementing policy changes.

Under the Trapped at Work Act, enacted in 2025 (A.584-C) and amended in 2026 (A.9452), employers are prohibited from requiring workers to repay them if the employment relationship ends before a stated period. The law is effective December 19, 2026.

Prohibition on employment promissory notes

An employer may not require, as a condition of employment or prospective employment, that a worker execute an "employment promissory note." This is any agreement, instrument or contract provision that requires the worker to pay or repay money to the employer (or its agent or assignee) if the worker leaves employment before the passage of a stated period, including provisions framed as reimbursement for training.

Substance-over-form rule

The law applies based on the effect of a provision, not its label. Repayment obligations described as training reimbursement, cost recovery, liquidated damages or conditional forgiveness of advances are treated as prohibited employment promissory notes if they require payment triggered by separation from employment before a stated period.

Permitted repayment arrangements

The law allows only the following categories of repayment obligations, and only if all statutory conditions are satisfied:

• Tuition repayment for a transferable credential, subject to strict statutory conditions, including a separate agreement, transferability, a cost cap, prorated repayment and no repayment upon termination except for misconduct
• Payment for employer property voluntarily sold or leased to the worker, if not tied to continued service
• Repayment of certain non-educational incentives only where expressly permitted by statute, generally limited to cases of termination for misconduct
• Obligations related to sabbatical leaves for educational personnel and arrangements established through a collective bargaining agreement

Enforcement and penalties

The New York State Department of Labor may assess civil penalties ranging from $1,000 to $5,000 per violation. There is no stand-alone private right of action; however, workers may recover attorneys' fees if they successfully defend against an employer's attempt to enforce a void repayment provision.

Ernst & Young LLP insights

Before December 19, 2026, employers should consult with counsel to determine if offer letters, employment agreements, training agreements, bonus and relocation arrangements or any other clawback obligation triggered by early separation could violate New York law.