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New York’s Trapped at Work Act, signed December 19, 2025, prohibits employers from requiring employees to sign agreements that impose repayment obligations if they leave before a set period. These “stay-or-pay” provisions are now declared void and unenforceable under New York Labor Law. In addition, amendments signed on February 13, 2026, refined the law’s scope and clarified key definitions.
What Is a Stay-or-Pay Agreement?
Stay-or-pay agreements, known in legal terms as employment promissory notes, are contract clauses that require you to pay your employer money if you leave your job before a specified date. They appear in offer letters, onboarding documents, and training agreements under different names, including:
- Training repayment agreements, requiring you to pay back the cost of company-provided training if you resign within a set window
- Signing bonus clawbacks, demanding repayment of a bonus if you leave before a stated period
- Relocation repayment clauses, requiring repayment of moving costs if you separate too soon
These agreements have become common across industries, from healthcare and finance to tech and retail. For many workers, the financial risk of triggering a repayment clause makes leaving a job, even a bad one, feel impossible. That is precisely the dynamic New York’s law was designed to address.
What Does the Trapped at Work Act Prohibit?
The Trapped at Work Act makes it unlawful for an employer to require an employee, as a condition of employment, to sign any agreement that obligates repayment of money if the employment relationship ends before a stated period. The law applies regardless of what the agreement calls the payment, training reimbursement, professional development costs, and similar labels are all covered.
Any such agreement is declared unconscionable, contrary to public policy, and unenforceable under New York law. Critically, the amended version of the Act, effective December 19, 2026, clarifies that the prohibition applies when the employment relationship ends for any reason, not just resignation. That means an employer cannot enforce a stay-or-pay clause even if you are laid off.
What Changed With the February 2026 Amendments?
Governor Hochul signed amendments to the Trapped at Work Act on February 13, 2026, making meaningful revisions to the original law. Key changes include:
- Coverage narrowed to employees–The original law applied broadly to workers, including independent contractors, interns, and volunteers. The amended Act covers only employees in the traditional sense. Gig workers and independent contractors are no longer included.
- Effective date extended–The substantive provisions of the amended law take effect December 19, 2026. The underlying prohibition on employment promissory notes remains in place from the original December 19, 2025, effective date, but the refined definitions and new exceptions apply starting December 2026.
- A narrow exception for transferable credentials–The amendments carve out one limited exception: an employer may enter into a separate, voluntary tuition repayment agreement if the credential being funded is widely recognized across the industry as a qualification for employment, not just useful to that specific employer. The credential must qualify as a “transferable credential”; the employee’s participation cannot be made a condition of employment; repayment amounts must be disclosed upfront and capped at actual costs; and no repayment is owed if the employee is terminated for any reason other than misconduct.
- Repayment for misconduct-based terminations–Under the amendments, repayment obligations may apply when an employee is terminated specifically for misconduct, a deliberate narrowing that prevents employers from labeling any departure as misconduct to trigger repayment.
What Agreements Are Still Permitted?
The Act does not prohibit all repayment obligations. The following remain enforceable:
- Repayment of money that was advanced to you, as long as the advance was not used to pay for job-related training
- Payment for employer-owned property that was sold or leased to you
- Sabbatical-related agreements for educational employees
- Provisions contained in collective bargaining agreements
- Voluntary tuition repayment agreements for transferable, industry-recognized credentials, subject to strict conditions
If your repayment agreement does not clearly fit one of these categories, it may fall within the law’s prohibition. Whether a specific clause is covered depends on its terms and how it functions in practice.
What Happens If an Employer Violates the Law?
Employers who require workers to sign prohibited agreements can face civil penalties of between $1,000 and $5,000 per violation, assessed by the New York State Department of Labor. Each affected employee counts as a separate violation.
The Act does not give employees a direct private right of action against employers for violations. However, if your employer attempts to sue you or collect on a prohibited agreement, you have the right to defend against that claim, and if you succeed, you may recover your attorney’s fees from the employer. At the same time, the New York State Department of Labor accepts complaints related to wage and labor law violations.
What Should You Do If You Signed One of These Agreements?
If you signed a training repayment agreement, a stay-or-pay clause, or a similar provision before or after December 19, 2025, the law may affect whether the agreement can be enforced against you. A few practical steps:
- Locate and read the repayment clause carefully, noting the trigger conditions, the repayment amount, and when it applies
- Do not assume the agreement is automatically unenforceable without reviewing the specifics against the Act’s current provisions
- Be aware that retroactive application of the law to agreements signed before December 19, 2025, remains legally unsettled and may depend on future regulatory guidance from the NYSDOL
If your employer is threatening to collect on a repayment clause, talk to an employment lawyer.
Understand Your Rights Before You Make a Move
Stay-or-pay agreements have kept many employees in jobs they wanted to leave, and some employers will continue trying to enforce them even under the new law. If you have a repayment clause in your employment agreement and are weighing a job change, turn to Lipksy Lowe. We will help you determine whether the Trapped at Work Act applies to your situation and explore your legal options. Contact us today for a confidential consultation