New York amends the "Trapped at Work Act" to clarify employers’ obligations

After initially going into effect on December 19, 2025, New York Governor Kathy Hochul signed a chapter amendment to the Trapped at Work Act (the Act) on February 13, 2026. As amended, beyond pushing its effective date to December 19, 2026, the Act now has a specified application, an expanded scope, and new circumstances exempt from the Act’s requirements. 

Changes to who and what is covered

The amended law narrows the Act’s application from a “worker” to an “employee” and “employer” as defined within the New York Labor Law. The Act as amended also clarifies that a covered “employment promissory note” includes “any instrument, agreement, or contract provision that requires an employee to pay the employer, or the employer's agent or assignee, a sum of money if the employee's employment relationship with a specific employer terminates before the passage of a stated period of time.” 

Even with these refinements, the general principle that this law intended to create is still intact: Employers may not require, as a condition of employment, any such repayment obligation unless it falls within an applicable exception. 

Incentive repayments are permitted in certain scenarios

The amended statute lays out an explicit exception for repaying incentive compensation, which was not provided as originally drafted. Specifically, it was not clear whether the Act applied to the repayment of bonuses when an employee leaves the organization before a specified time. 

Now, as amended, the Act permits agreements that require employees to repay financial bonuses, relocation assistance, or other non-educational incentives or benefits that are not tied to specific job performance if they leave before a specified time “unless the employee was terminated for any reason other than misconduct or the duty requirements of the job were misrepresented to the employee.” 

Although it is not explicitly addressed in the amended law, this exception can reasonably be interpreted to apply to contracts requiring repayment of incentive compensation where an employee resigns before a specified date. But, as ratified, any effort to enforce a contract that allows an employer to collect a paid-out bonus from an employee who was involuntarily terminated – such as during a layoff or for insufficient performance – before a certain time would be unenforceable.  

Tuition repayment for transferable credentials exception

The amended law provides for an additional exception to the Act that covers tuition repayment by employees for transferable credentials: A “transferable” credential is a degree, diploma, license, certificate, or documented skill proficiency or course completion widely recognized by employers in the relevant industry as a qualification for employment (not for employer‑specific or non‑transferable training and mandated safety or compliance training). 

A compliant agreement for the collection of such tuition expenses under this exception must: 

• Be separate from any employment contract 

• Not require the employee to obtain the transferable credential as a condition of employment 

• Specify the repayment amount before the employee agrees to the contract – which must not exceed the cost to the employer of the tuition, fees, and required educational materials for the transferable credential 

• Provide for a prorated repayment amount during any required employment period without requiring an accelerated payment schedule if the employee separates from employment; and 

• Like incentive compensation, not require repayment if the employee is terminated, except if the employee is terminated for misconduct. Though not expressly stated in its text, the Act can reasonably be interpreted to permit repayment for voluntary departures. 

Exceptions that remain from the Act’s original text

The amended law retained the following exceptions, which were outlined in the Act’s original text: 

• Property sold or leased to an employee: Employers may still require an employee to pay for property sold or leased to them 

• Sabbatical leaves: Employers may still require education personnel to comply with any terms or conditions of sabbatical leaves; and 

• Collective bargaining agreements: Union represented employees may be subject to repayment provisions negotiated at the bargaining table. 

Enforcement and penalties

The Act, as initially drafted and as amended, does not provide for a private right of action. Employers determined to have violated the law face fines of not less than one thousand dollars and not more than five thousand dollars per violation. Each employee or prospective employee required to execute an unlawful employment promissory note constitutes a separate violation. 

Employer considerations

Though the Act will not take effect for ten more months, there is a possibility that all agreements in effect on or after December 19, 2026 will be subject to the Act’s requirements as amended – even if they were executed beforehand. 

To avoid any compliance issues, employers in New York should conduct a thorough review of all active employment agreements to assess whether they contain repayment obligations, prepare a separate agreement for tuition repayment obligations, and revise all employment agreement templates that address requirements to repay incentive compensation.