New York’s Trapped at Work Act: What Employers Need to Know in 2026

On December 19, 2025, New York Governor Kathy Hochul signed the Trapped at Work Act, a new law that prohibits employers from requiring workers to agree to “employment promissory notes” as a condition of employment. This new law took effect immediately. However, on January 6, 2026, the New York State Assembly introduced an amendment that clarifies the Trapped at Work Act and extends its effective date by one year.

What is the Trapped at Work Act?

Under the Trapped at Work Act, New York employers may not require workers to agree to “employment promissory notes” as a condition of employment. This term is defined broadly to include any contract, or any term of a contract, that requires a worker to pay the employer money if the worker leaves before a specified point in time (e.g, requiring a worker to repay a signing bonus or relocation expenses if the worker leaves within “X” number of months).

The new law applies to all employers regardless of size, and it defines “workers” to include employees, independent contractors, interns, externs, volunteers, apprentices, sole proprietors who provide services to an employer or to the employer’s clients/customers on the employer’s behalf, and individuals providing services through a business, nonprofit entity, or association. A “worker”, however, does not include an individual, even if the individual performs incidental service for the employer, whose sole relationship with the employer is as a vendor of goods.

Notably, New York’s Trapped at Work Act is not as broad as California’s “stay or pay” law that took effect on January 1, 2026. Additionally, while California’s “stay or pay” law completely voids any employment contract that violates it, only violative terms are deemed unenforceable under the Trapped at Work Act.

What Are the Consequences of Noncompliance?

As noted, contract terms that violate the Trapped at Work Act are unenforceable going forward. Employers that violate the law may also face civil fines imposed by the New York State Commissioner of Labor, ranging from $1,000 to $5,000 per violation. Additionally, if a worker successfully defends against a lawsuit filed to enforce an “employment promissory note” that violates the Trapped at Work Act, the worker is entitled to attorneys’ fees in addition to any other applicable remedies.

Are There Any Exceptions?

While the Trapped at Work Act broadly prohibits repayment provisions in employment contracts and other agreements with workers, there are exceptions. These exceptions include:

Agreements that require repayment of true advances
Agreements that require payment for property sold or leased to a worker
Agreements related to the terms of sabbatical leave in academia
Agreements entered into as part of the collective bargaining process

What May Change if the Amendment to the Trapped at Work Act is Passed?

If the proposed amendment to the Trapped at Work Act is passed, it will make several important changes to the law:

1. The proposed amendment will extend the Trapped at Work Act’s effective date by one year, i.e., to December 19, 2026. This extension will provide employers with additional time to comply with the law’s requirements.
2. While the current version of the law applies broadly to “workers”, including independent contractors, the proposed amendment would apply to “employees”, which are defined as “any person employed for hire by an employer in any employment.”
3. The proposed amendment clarifies that the employer may continue to utilize repayment agreements for employees to:

Reimburse the employer for the cost of tuition, fees, and required educational materials for a transferable credential that meets certain requirements (as defined in the proposed amendment).
Pay the employer for any property the employer has sold or leased to the employee, as long as such sale or lease was voluntary.
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.

4. The proposed amendment provides that, when the New York State Commissioner of Labor assesses the amount of the penalty it will impose for a violation of the law, the Commissioner shall give due consideration to the size of the employer’s business, the good faith basis of the employer to believe that its conduct was in compliance with the law, the gravity of the violation, and the history of previous violations.

What Are the Next Steps for Employers?

Employers should review their current contracts with employees, independent contractors, and other individuals who may fall under the broad definition of workers in the Trapped at Work Act and determine whether these contracts contain repayment provisions that may need to be analyzed and revised in light of the Trapped at Work Act. Such repayment provisions may include provisions regarding the repayment of signing bonuses, repayment of relocation expenses, tuition reimbursement, and training expenses. Likewise, before attempting to enforce any repayment obligations under contracts covered by this new law, employers should consult their employment law counsel to assess whether doing so may expose them to liability for civil penalties and attorneys’ fees.

However, employers should also be mindful of the proposed amendment, discussed above, which may extend the effective date of this law and narrow its restrictions.

If you would like assistance with reviewing your company’s contracts and determining whether changes should be made, or would like to know more about your company’s obligations under New York’s Trapped at Work Act, we encourage you to get in touch so we can help.