Important Amendments Proposed for New York’s Recently Enacted “Trapped at Work” Act

Less than a month after Governor Hochul signed into law the “Trapped at Work Act” (the “Act”) which took effect immediately and which we reported on here, the New York State Legislature introduced a bill amending the Act. The proposed amendments (the “Amendments”) would make some significant changes to the existing Act’s prohibitions on employment “promissory notes,” including by providing clarity on what sorts of “stay or pay” arrangements would remain lawful. Many of the Amendments respond to statements in Governor Hochul’s signing memorandum in which she expressed concerns about certain ambiguous aspects of the Act and indicated that her signing of the Act was contingent upon the Legislature’s agreement to certain chapter amendments. Below, we provide an overview of the salient portions of the Act impacted by the Amendments and offer some compliance-based suggestions. 

The Amendments Would Delay the Effective Date by at Least One Year.

The Amendments would delay the effective date of the Act to one year after it becomes law. While the Amendments do not specify whether this one-year extension is measured from the date of original enactment (i.e., December 19, 2025) or the date on which the Amendments become enacted, either extension would provide employers additional time to come into compliance with the new law. 

The Amendments Simplify the Definitions of Covered Employees and Employers.

The Act currently applies to all “workers,” which includes employees, independent contractors, externs, volunteers, apprentices, and even sole proprietors (in certain circumstances). But the Amendments would simplify this definition substantially and provide that the Act would apply to “employees” defined as “any person for hire by an employer in any employment.” Likewise, the Amendments would change the definition of a covered “employer” to now include “any person, corporation, limited liability company, or association employing any individual in any occupation, industry, trade, business, or service including the state and its political subdivision.” Interestingly, the Amendments remove “partnership” from the definition of “employer” along with any explicit reference to a “subsidiary” of a covered employer (both terms had been part of the definition of “employer” in the original Act). 

The Amendments Clarify Exclusions and Carve-Outs, Including Importantly to Certain Incentive-Based Bonuses.

Many employers were startled at the Act’s passage by the potential types of agreements that could conceivably have been covered by the Act’s prohibitions. The Amendments provide some clarity regarding the Act’s scope and set forth several requirements that agreements must meet to fall outside the Act’s ambit. 

Critically, the Amendments would exclude from coverage agreements that require the employee to repay a “financial bonus, relocation assistance, or other non-educational incentive or other payment or benefit that is not tied to specific job performance, unless the employee was terminated for any reason other than misconduct or the duties or requirements of the job were misrepresented to the employee.” Standard sign-on, retention, and certain other bonus agreements would likely fall under this exception, provided such agreements are aligned with these restrictions.

Important clarifications have also been incorporated in the Amendments regarding educational reimbursement arrangements. Specifically, the Amendments would exclude from the Act’s coverage agreements involving certain “transferable credentials,” which are defined as “any degree, diploma, license, certificate, or documented evidence of skill proficiency or course completion” where the employee develops skills or qualifications apart from those used solely for the “employer’s specific business practices” and which would “demonstrably enhance the employee’s employability with other employers.” Employers are permitted to continue educational reimbursement arrangements involving transferable credentials “for the cost of tuition, fees, and required educational materials for a transferable credit” where the agreement meets the following conditions:

• The agreement is set forth in a written contract separate from any contract for employment;

• The agreement does not require the employee to obtain the transferable credential as a condition of employment;

• The agreement specifies the repayment amount before the employee agrees to the contract, and the repayment amount does not exceed the cost to the employer of the tuition, fees, and required educational materials for the transferable credential received by the employee;

• The agreement provides for a prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period and does not require an accelerated payment schedule if the employee separates from the employment; and

• The agreement does not require repayment to the employer by the employee if the employee is terminated, except where the employee is terminated for misconduct.

Finally, the Amendments would also exclude agreements that require the employee to pay the employer for any property that the employer has sold or leased to the employee, as long as the sale or lease was voluntary. 

Employees May File Complaints with the Commissioner of Labor.

While the Amendments would not provide employees with a private right of action (consistent with the current version of the Act), the Amendments would allow aggrieved employees to file a complaint with the New York State Commissioner of Labor, who is then tasked with investigating the alleged violation. In assessing penalties, the Amendments would give the Commissioner of Labor some discretion to account for the size of the employer’s business and the “good faith basis of the employer to believe that its conduct was in compliance with the law,” as well as the “gravity of the violation” and whether the employer has any history of violations. 

Employer Takeaways

The Amendments, if enacted, would be welcomed news by employers who have scrambled in recent weeks to understand the sudden shifts in this area. While passage of the Amendments would clear the way for the continued permissibility of many standard sign-on bonuses, retention bonuses, relocation stipends, and other financial incentive agreements, New York employers will still need to ensure that their form agreements for those types of incentives are compliant with the restrictions the Amendments impose related to certain termination situations. Similarly, New York employers will need to carefully vet tuition and education reimbursement arrangements to ensure those arrangements’ terms align with the Amendments’ mandates. Multi-jurisdictional employers should also remain aware of recently enacted “stay or pay” arrangements in other states, such as the recent law that went into effect in California (which we wrote about here).

Mintz’s Employment Practice stands ready to assist New York employers through these changes and we will continue to monitor and update our readers as developments unfold here.

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