On December 19, 2025, Governor Kathy Hochul signed the “Trapped at Work Act” (Assembly Bill A584C) into law. Effective immediately, this legislation amends the New York Labor Law to prohibit employers from requiring workers to enter into “employment promissory notes”, commonly known as “stay-or-pay” provisions as a condition of employment.
Background: Ending the “Trap”
The Act addresses the growing use of contract clauses that require employees to pay their employer a sum of money if they resign before a specified date. These arrangements often characterize the payment as reimbursement for training provided by the employer. The legislature has deemed such notes “unconscionable, against public policy, and unenforceable” because they can effectively trap workers in undesirable jobs under the threat of financial ruin.
Key Prohibitions
- Employment Promissory Notes Banned. Employers are prohibited from requiring any worker (including employees, independent contractors, interns, or volunteers) to execute an agreement that requires payment to the employer if they leave before a stated period.
- Training Costs Specifically Targeted. The definition of a prohibited note explicitly includes agreements framed as “reimbursement for training provided to the worker”.
- Condition of Employment. Employers cannot make hiring or continued employment contingent on signing such an agreement.
Exceptions to the Rule
While the ban is broad, the Act provides limited exceptions where repayment agreements are still permissible:
- Cash Advances. Agreements that require repayment of “any sums advanced” to the worker, provided those sums were not used to pay for training related to employment.
- Property Sales/Leases. Agreements covering payment for property sold or leased by the employer to the worker.
- Collective Bargaining. Agreements entered into as part of a collective bargaining agreement.
- Sabbaticals. Specific agreements regarding sabbatical leaves for educational personnel.
Penalties for Non-Compliance
The consequences for violating the Trapped at Work Act are significant:
- Fines: The New York Department of Labor may assess fines between $1,000 and $5,000 per violation (per worker).
- Legal Fees: If an employer sues a worker to enforce a prohibited note and loses, the worker is entitled to recover their attorney’s fees.
Next Steps for Employers
Because the law is effective immediately, New York employers must act quickly to ensure compliance.
- Review Offer Letters and Agreements: Immediately audit all standard employment contracts, offer letters, and training agreements to identify and remove any “stay-or-pay” or training repayment clauses.
- Cease Enforcement: Stop any ongoing attempts to collect on existing training repayment agreements. While the Act strictly prohibits requiring new notes, attempting to enforce existing ones may now carry legal risks, including liability for the employee’s legal fees.
- Update Hiring Protocols: Train hiring managers and HR teams to ensure no verbal or written conditions regarding training repayment are communicated to prospective hires.
- Consult Legal Counsel: Speak with your labor attorney to determine if any specific “sign-on bonus” claw backs or other repayment structures fall within the “sums advanced” exception, as this area remains legally nuanced.
