On February 13, 2026, New York Governor Kathy Hochul signed chapter amendments to the Trapped at Work Act, which restricts repayment agreements tied to leaving a job. The amendments delay the law’s start and clarify which repayment agreements remain lawful, including a narrow path for tuition tied to transferable credentials.

This update, applicable to all New York employers, covers only agreements with employees (excluding independent contractors, interns and volunteers), and the amended law takes effect on February 13, 2027.

What Employers Need to Do

• Review all templates including offer letters, sign‑on/relocation, tuition, reimbursement, and any payback provisions.

• Segregate tuition agreements into a stand‑alone contract that meets all five statutory conditions.

• Retool bonus/relocation clawbacks by removing performance triggers; adding clear misconduct and misrepresentation clauses; and defining “misconduct” carefully.

• Exclude employer‑specific or mandatory safety/compliance training from any repayment obligation.

• Set a timeline by using 2026 to review and update agreements, policies, and templates so they are compliant by February 2027.

Overview

• The law voids “employment promissory notes” requiring employees to repay the employer (often for training costs) if they leave before a set period. There are some exceptions to this.

• Clarified Carve‑outs: Certain agreements remain permitted if strict conditions are met (tuition for a transferable credential, voluntary property arrangements, non‑performance bonus/relocation clawbacks, sabbatical terms for educational staff, and union‑negotiated programs).

What Changed and When

• December 19, 2025: Law signed, initially effective immediately.

• February 13, 2026: Chapter amendments (A9452/S8822) signed; the effective date moved to February 13, 2027, and key terms were clarified.

• Act Amendment Reason: To resolve gray areas (tuition programs, sign‑on bonuses, relocation) and to give employers time to adjust.

Who is Covered

• The law applies only to employees. The law no longer covers independent contractors, interns, or volunteers.

• The employer definition is aligned with New York Labor Law (any person/entity employing individuals, including the state and its political subdivisions).

What is Prohibited

• Banned: Any agreement requiring an employee to pay the employer if the employment ends before a stated period, for any reason.

• Such provisions are unconscionable, against public policy, and unenforceable in New York.

Remaining Allowances and Permissions

A) Tuition for a “Transferable Credential”: Defined as a degree, license, certificate, or documented skill widely recognized in the industry (not employer‑specific). Mandated safety/compliance training is not transferable. This is allowed only if all the following are true:

1. There is a separate written contract (not part of the employment agreement).
2. The credential is not a condition of employment.
3. Repayment is pre‑set and capped at the employer’s actual cost.
4. Repayment is prorated, with no acceleration if the employee leaves.
5. No repayment is required if the employee is terminated, except for misconduct.

B) Employer Property: Repayment is permitted for voluntarily purchased or leased employer property.

C) Non‑performance Incentives: Clawbacks are allowed for sign‑on/financial bonuses, relocation, or other non‑educational incentives not tied to job performance, unless (i) the employee was terminated for a reason other than misconduct, or (ii) the job was misrepresented.

D) Sabbaticals and Union Programs: Sabbatical terms for educational personnel and collectively bargained programs remain permitted.

Why this matters

• Employers retain tools to protect investments in hiring and mobility (e.g., sign‑on bonuses and relocation) while avoiding unlawful “stay‑or‑pay” structures.

• Tuition support remains viable when structured under the transferable‑credential framework with all statutory conditions.

• The one‑year delay provides time to repaper agreements and train HR and Talent Acquisition teams.

Key Risks for Employers

• Bundling tuition terms into offer letters (must be a separate contract).

• Requiring tuition-supported credential for employment. Participation must be optional.

• Using acceleration clauses or flat payback schedules (must be prorated with no acceleration).

• Performance‑tied clawbacks for bonuses/relocation (not allowed – keep them non‑performance).

• Applying terms to contractors or interns (scope is employees only).

Additional Information

What Changed and When

• December 19, 2025: Law signed, initially effective immediately.

• February 13, 2026: Chapter amendments (A9452/S8822) signed; the effective date moved to February 13, 2027, and key terms were clarified.

• Why it was amended: To resolve gray areas (tuition programs, sign‑on bonuses, relocation) and to give employers time to adjust.

Who is covered

• The law applies only to employees. The law no longer covers independent contractors, interns, or volunteers.

• The employer definition is aligned with New York Labor Law (any person/entity employing individuals, including the state and its political subdivisions).

What is prohibited

• Banned: Any agreement requiring an employee to pay the employer if the employment ends before a stated period, for any reason.

• Such provisions are unconscionable, against public policy, and unenforceable in New York.

What remains allowed

A) Tuition for a “transferable credential.” Defined as a degree, license, certificate, or documented skill widely recognized in the industry (not employer‑specific). Mandated safety/compliance training is not transferable. This is allowed only if all the following are true:

1. There is a separate written contract (not part of the employment agreement).
2. The credential is not a condition of employment.
3. Repayment is pre‑set and capped at the employer’s actual cost.
4. Repayment is prorated, with no acceleration if the employee leaves.
5. No repayment is required if the employee is terminated, except for misconduct.

B) Employer property. Repayment is permitted for voluntarily purchased or leased employer property.

C) Non‑performance incentives. Clawbacks are allowed for sign‑on/financial bonuses, relocation, or other non‑educational incentives not tied to job performance, unless (i) the employee was

terminated for a reason other than misconduct, or (ii) the job was misrepresented.

D) Sabbaticals and union programs. Sabbatical terms for educational personnel and collectively bargained programs remain permitted.

Source References

• New York A9452 – Relates to the prohibition of the use of employment promissory notes and other similar provisions; defines transferable credential; relates to the effectiveness of such provisions.
• New York Enacts Trapped at Work Act: Ban on Stay‑or‑Pay Clauses (VensureHR)

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