New York’s “Trapped at Work Act” Takes Effect and Prohibits Certain “Stay or Pay” Agreements

On December 19, 2025, New York enacted the “Trapped at Work Act” which, effective immediately, adds a new chapter to the New York Labor Law barring employers from entering into “employment promissory notes” with employees, contractors, and other workers. This development follows a similar measure enacted in California earlier this year which was broader and prohibited, or otherwise placed material restrictions around, many “stay or pay” arrangements (which we covered here). While the Act does not ban all “stay or pay” arrangements, it does prohibit certain types of agreements and creates a new hurdle for employers to clear in structuring employee incentive programs.  

The Scope of Restrictions

The Act regulates certain agreements between “employers” (broadly defined to cover individuals or entities that “hire or contract” with a worker to work for the employer or that provide training to workers) and “workers” (also broadly defined to cover employees, independent contractors, interns, externs, volunteers, apprentices, and sole proprietor service providers, though individuals “whose sole relationship with the employer is as a vendor of goods” are not covered). 

Specifically, New York employers are now prohibited from requiring workers to enter into an employment promissory note as a condition of employment. Such agreements are now void and unenforceable because they are “against public policy” and “unconscionable.” 

The Act defines a prohibited “employment promissory note” as “any instrument, agreement, or contract provision that requires a worker to pay the employer, or the employer's agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time.” An “employment promissory note” explicitly includes “any instrument, agreement, or contract provision which states [that] payment of moneys constitutes reimbursement for training provided to the worker by the employer or by a third party.” 

Notable Exceptions

Despite the seemingly broad set of agreements covered, the Act lists several arrangements which do not constitute prohibited “employment promissory notes.” 

First, the Act is clear that it does not “prohibit or render void or unenforceable any agreement between a worker and an employer that requires the worker to repay to the employer any sums advanced to such worker by the employer, unless such sums were used to pay for training related to the worker's employment with the employer.”

Second, the Act does not apply to agreements that require a worker to pay the employer for property sold or leased to the worker. 

Third, the Act excludes incentive programs contained in collective bargaining agreements, as well as programs for educational personnel that allow for sabbatical leaves.

The Act’s Effective Date

The Act’s restrictions do not appear to apply retroactively. Instead, employers are restricted from requiring workers or prospective workers to “execute” agreements containing prohibited provisions on/after the Act’s December 19, 2025 effective date. However, employers should still tread carefully with respect to agreements that were executed before the effective date. For example, if an existing agreement containing provisions covered by the Act is amended or revised following the effective date, these new restrictions could apply to the updated and/or amended version. 

Enforcement and Penalties

The Act does not create a private right of action for workers. Instead, the New York State Department of Labor (NYSDOL) may issue civil penalties between $1,000 and $5,000 for each violation. However, workers are allowed to recover attorneys’ fees if they successfully defend against an employer’s attempt to enforce any agreements prohibited by the Act. Accordingly, employers should doubly confirm that pre-existing agreements are enforceable before attempting to assert rights under such agreements, as an unsuccessful attempt could result in a worker recovering attorneys’ fees even if the underlying agreement did not include a provision providing for such recovery. 

Next Steps and Takeaways

This robust set of exceptions to the general prohibition aligns with the Act’s legislative summary, which focuses on banning “training reimbursement agreements” as opposed to more broadly prohibiting all such repayment agreements. That said, additional clarity is needed, including whether signing or retention bonuses would fall under the “sums advanced” exception along with other agreements providing employees contingent incentives to stay (provided such arrangements do not focus on recoupment for “training” programs). Those types of agreements appear to satisfy the exceptions, but we will look for confirmation from the NYSDOL via regulations it may promulgate and/or other guidance it may issue. Indeed, Governor Hochul expressed concerns about such ambiguities when signing the Act into law and urged clarifications after signing the Act into law. Until the NYSDOL issues further guidance, the precise contours of these prohibitions will remain somewhat ambiguous. 

To ensure compliance with the Act, New York employers should review their existing agreements requiring repayment, including those with clawback components, to better ensure they can meet one of the act’s exemptions. For signing and retention bonuses, employers should consider whether to update their agreements to confirm that the amounts paid to employees are sums that are being advanced. Alternatively, employers may also consider restructuring certain incentive compensation to pay bonuses to employees only after they meet certain tenure milestones. 

Mintz’s Employment Practice is available to help employers navigate this new Act to ensure compliance. 

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