Update: New York Amends Its Trapped at Work Act, DOL Issues Guidance for Employers

After enacting the Trapped at Work Act (the “Act”) late last year, the New York State Legislature swiftly amended the Act in February. As amended, the Act takes effect on December 19, 2026, and the New York Department of Labor (“DOL”) recently released guidance addressing several important questions.

We published an article discussing New York’s Trapped at Work Act (the “Act”) shortly after Governor Hochul signed it into law. Since then, the Act has been amended, and the DOL has issued guidance addressing several questions that the statutory language left unanswered. As a reminder, the Act largely prohibits New York employers from requiring employees or job applicants to sign promissory notes as a condition of employment. Commonly referred to as “stay or pay” agreements, these promissory notes can take a variety of forms, and it is the substance of an agreement that ultimately determines whether it violates the law.

Amendment Limits the Scope of the Act and Delays Its Effective Date

The amendment passed in February limited the Act’s scope so it now applies only to W-2 employees—excluding independent contractors, interns, and volunteers. Under the amendment, employers can require repayment for tuition and educational materials associated with industry-recognized “transferable credentials” (degrees, licenses, or certificates), provided the agreement is separate from the main employment contract, prorated over the work period, and not accelerated upon separation. Moreover, agreements related to signing bonuses, relocation assistance, and non-educational incentive pay are still permissible if they are not tied to job performance, unless an employee is terminated “for any reason other than misconduct or the duties or requirements of the job were misrepresented to the employee.”

The amendment also delayed the Act’s effective date to “one year after it shall have become a law,” i.e., December 19, 2026.

The DOL’s Guidance Provides Important Insights for Employers.

Even as amended, the Act left several key questions unanswered. The DOL recently answered many of these questions in guidance it published online. For example:

• The Act only applies to agreements entered into on or after its effective date. The DOL’s guidance makes clear that the Act only applies to “new agreements, or new or amended terms in existing agreements, entered into on or after December 19, 2026.” Thus, the Act will not render pre-existing agreements null and void.
• The Act does not apply to agreements that are “voluntary.” The DOL’s guidance also clarifies that the Act only applies to agreements offered as true conditions of employment. If an employee enters into an agreement voluntarily (“meaning that the employee could continue with employment without agreeing to the terms”), the agreement is not automatically rendered null and void.

Employers in New York must be ready to comply with the Trapped at Work Act when it takes effect later this year. Contact us if you would like more information.