New York's Trapped at Work Act: What Employees and Employers Need to Know Before 2027

You just received a better job offer. The pay is higher, the role fits your career goals, and you are ready to make a move. But before you give notice, you pull out your employment contract — and there it is: a clause saying you owe your current employer $12,000 in "training repayment" if you leave within two years.

That scenario plays out every week across New York City. Employers have used these so-called "stay-or-pay" provisions for years to discourage workers from leaving. But as of December 2025, New York drew a hard line. Governor Kathy Hochul signed the Trapped at Work Act into law, making many of these provisions illegal under the New York Labor Law.

Whether you are an employee who signed one of these clauses or an employer who uses them, here is what you need to know — and what you need to do before the law takes effect in February 2027.

What Is a "Stay-or-Pay" Provision?

A stay-or-pay provision is a contract term that requires you to pay your employer money if you leave your job before a specified date. These clauses appear in employment agreements, offer letters, and onboarding documents. They usually look like one of three things:

• Training repayment agreements: Your employer says it spent $15,000 training you. If you resign before 18 months, you owe it back.

• Onboarding cost reimbursement clauses: Your employer claims onboarding you cost thousands of dollars. Leave early and you are on the hook.

• Employment promissory notes: You literally sign a note — like a loan — where you "borrow" the cost of your training and promise to repay it if you leave before the term ends.

Under the Trapped at Work Act, many of these arrangements are now declared "against public policy, unconscionable, and unenforceable" under New York law. In plain terms: the state has decided that trapping workers in jobs through financial penalties is fundamentally unfair.

What Does the Trapped at Work Act Actually Prohibit?

The Trapped at Work Act adds a new Article 37 to the New York Labor Law. At its core, it prohibits one thing:

No employer may require any employee — or prospective employee — to sign an employment promissory note as a condition of getting or keeping a job.

An "employment promissory note" is defined broadly. It covers any agreement, contract provision, or instrument that requires a worker to pay the employer if employment ends before a specified date. That includes:

• Training repayment clauses

• Onboarding cost reimbursement provisions

• Any repayment obligation tied to the cost of preparing you for the role

The law also covers agreements that an employer presents as a condition of employment — meaning if you had to sign the clause to get the job in the first place, that is a red flag that the provision may be illegal.

What the February 2026 Amendments Changed

Governor Hochul signed the original Trapped at Work Act on December 19, 2025. Just two months later, on February 13, 2026, she signed significant amendments in response to employer concerns. The amendments clarified several key points.

The Law Now Applies Only to Employees

The original version covered virtually everyone — employees, contractors, interns, volunteers, and apprentices. The February 2026 amendment narrows protection to employees only. Independent contractors (1099 workers), interns, externs, and volunteers are no longer covered.

Carve-Out for Transferable Credentials

Employers can still require repayment for genuine transferable credentials — educational and professional qualifications that have value across the industry, not just at one company. These include:

• College tuition and university degrees

• Industry-wide professional certifications

• Licenses recognized across the field (such as professional engineering licenses or nursing credentials)

But even for transferable credentials, the repayment agreement must be structured carefully to be enforceable:

• It must be in a separate, standalone written agreement — not buried in an employment contract

• The repayment amount must be specified upfront

• Repayment must be prorated — meaning the amount you owe decreases as time passes

• Repayment cannot be accelerated — your employer cannot demand the full balance immediately upon your departure

Critically, employer-specific training that does not result in a transferable credential cannot be subject to any repayment obligation. If your employer trained you on its own internal systems, proprietary processes, or company-specific workflows, it cannot require you to repay those costs. That knowledge stays with you.

Carve-Out for Relocation Assistance and Non-Performance Bonuses

An employer may require repayment of relocation assistance or non-performance bonuses (such as signing bonuses) under two circumstances only:

• You voluntarily resign before a specified date, or

• You are terminated for misconduct

If you are laid off, terminated without cause, or let go for any reason other than misconduct, your employer cannot require you to repay relocation assistance or signing bonuses under this law.

Enforcement Delayed to February 2027

One major change from the amendments: enforcement is pushed back. The Trapped at Work Act now takes full effect on February 13, 2027, giving employers approximately one year to review and update their agreements.

That deadline matters. Employers who have not reviewed their contracts by then face real legal exposure.

What Happens If Your Employer Tries to Enforce an Illegal Clause?

The Trapped at Work Act is enforced by the New York State Department of Labor — not through private lawsuits. This means you cannot file a personal injury-style lawsuit in court simply for having one of these clauses in your contract.

However, you have meaningful rights:

• You can file a complaint with the New York Department of Labor

• Employers found in violation face fines of $1,000 to $5,000 per violation

• The Labor Commissioner considers employer size, compliance history, and good-faith efforts when setting penalties

• If your former employer sues you to enforce an illegal stay-or-pay clause and you win, you can recover your attorney's fees

We have written in depth about similar rights employees have when employers withhold money they are owed. See our post on unpaid sales commissions in New York for a related discussion of how New York Labor Law protects workers from one-sided financial arrangements.

What New York Employers Must Do Before February 2027

If you run a business in New York City — or anywhere in New York State — and your employment agreements contain stay-or-pay provisions, you need to act before the February 2027 deadline.

Step 1: Audit Every Employment Agreement

Review every employment contract, offer letter, onboarding document, and promissory note currently in use. Flag any clause that requires an employee to repay money if they leave before a specified date — regardless of how it is labeled.

Step 2: Remove Non-Compliant Provisions

Any training repayment or onboarding cost reimbursement clause that does not fall squarely within the law's narrow carve-outs must be removed. Leaving illegal clauses in place — even if you never intend to enforce them — is a violation that could result in Department of Labor penalties.

Step 3: Restructure Permissible Agreements

If you provide tuition assistance or fund transferable credentials (industry certifications, professional licenses), you can still protect that investment — but the agreement must be in a standalone written document, specify the repayment amount upfront, and use prorated, non-accelerated repayment terms.

Step 4: Shift to Alternative Retention Tools

Many employment law attorneys and HR consultants are advising New York employers to replace stay-or-pay clauses with:

• Deferred compensation with vesting schedules

• Equity awards — stock options or grants that vest over time

• Retention bonuses paid in installments tied to tenure

These tools achieve the same retention goal without running afoul of the Trapped at Work Act.

If you are unsure whether your current employment agreements comply, reviewing them now with a commercial litigation attorney is far less expensive than defending a Department of Labor complaint after February 2027. For context on how New York courts evaluate potentially one-sided contractual terms more broadly, see our post on whether liquidated damages clauses are enforceable in New York.

What Employees Should Do Right Now

Even though enforcement does not begin until February 2027, there are steps you can take today if you have already signed a stay-or-pay agreement.

Read your contract carefully. Look for any language requiring you to repay money if you leave — including clauses framed as "training reimbursement," "onboarding cost recovery," or any reference to a promissory note.

Do not assume the clause is valid. Under the Trapped at Work Act, many of these provisions will be unenforceable as of February 2027. Some may already be challengeable under existing contract law principles — particularly if you never meaningfully agreed to them or if they were presented as non-negotiable take-it-or-leave-it conditions.

Get legal advice before making a job change. If you are considering leaving a job and you have a repayment clause in your contract, speak with an employment attorney before giving notice. What you think you owe may be far less — or nothing at all.

Document any employer threats. If your employer threatens to sue you or garnish your wages under a stay-or-pay clause, save every communication. That documentation will be critical if you need to file a complaint with the Department of Labor or defend against a lawsuit.

For a broader look at how disputes with employers play out in New York courts, see our step-by-step guide on how to sue a company in New York.

Frequently Asked Questions

Does the Trapped at Work Act apply to employment contracts signed before December 2025?

The law applies going forward, but its impact on pre-existing contracts is not fully settled. The statute declares certain agreements "against public policy and unenforceable," which courts may apply retroactively. If your employer is trying to enforce a pre-2026 training repayment clause, consult an attorney — the argument that it is unenforceable may still be available to you.

Does the Trapped at Work Act protect independent contractors?

No. After the February 2026 amendments, the law applies only to "employees." Independent contractors (1099 workers), interns, volunteers, and externs are not covered. If you work as a 1099 contractor with a repayment clause in your agreement, you would need to rely on traditional contract law arguments rather than this statute.

Can my employer still require me to repay tuition or certification costs?

Yes, but only under strict conditions. The repayment agreement must be in a separate, standalone written document, must specify the repayment amount upfront, and must use prorated — not accelerating — repayment terms. Employer-specific training that does not result in a transferable industry credential cannot be subject to any repayment obligation, period.

What is the penalty if an employer violates the Trapped at Work Act?

The New York State Department of Labor can fine violating employers between $1,000 and $5,000 per violation. The Labor Commissioner considers the employer's size, compliance history, and good-faith efforts when determining the penalty. Employees cannot sue directly but can recover attorney's fees if they successfully defend against an employer's attempt to enforce an illegal clause.

The Bottom Line

New York's Trapped at Work Act is one of the most worker-protective employment laws the state has passed in years. If you ever signed a training repayment clause or employment promissory note in New York, that agreement may become unenforceable in February 2027 — and potentially before that under existing contract law principles.

Whether you are an employee who feels financially trapped or an employer trying to protect your investment in your team, the rules have changed. The time to act is now, not after the deadline hits.

If you or someone you know is facing a dispute over an employment agreement, a training repayment demand, or a commission or wage claim in New York, the team at Yassi Law PC is ready to help. Call us today at 646-992-2138 for a consultation.

Contact Us

Written by Reza Yassi | LinkedIn

This article is for informational purposes only and does not constitute legal advice. Although I am an attorney, I am not your attorney, and reading this article does not create an attorney-client relationship. Laws vary by jurisdiction and may have changed since the publication of this article. For advice specific to your situation, consult a qualified attorney.