Late last year, we blogged about a new law in New York that prohibits employers from trapping employees by obligating them to repay certain costs if they don’t remain employed for a specific period of time. In February, Governor Hochul signed an amendment to the “Trapped at Work” law. While the law’s central prohibition is unchanged, the amendment sharpens some of its language, and employers should be aware of key updates.
What’s Changed with the Amendment
Under the original version of New York’s Trapped at Work Act, employers were prohibited from requiring workers or job applicants to enter into an “employment promissory note” as a condition of employment. An employee promissory note was defined as any agreement that requires a worker to repay a sum of money if the worker leaves the job before a specific date.
As you may have noticed, the Act’s scope was exceedingly broad. The term “worker” meant the Act applied to a host of people, including independent contractors, interns, volunteers, or even sole proprietors who provided services to an employer. The original language also could have been interpreted as prohibiting mutually beneficial agreements between employers and employees involving repayment schemes such as tuition reimbursement programs, relocation assistance programs, or retention bonuses.
The Act’s amendment is designed to address these challenges. Employers should take note of the following changes to ensure they meet their compliance obligations.
Effective Date
The Act’s original language provided for an immediate effective date which would have been December 19, 2025. However, the amendment replaces the immediate language with “one year after it shall become law.” As of this writing, there remains some ambiguity on the precise effective date. One understanding is one year from the original Act’s effective date, December 19, 2026. Another interpretation is the law means one year from passage of the amendment, February 13, 2027.
In light of this ambiguity, employers should err on the side of caution and comply with the law by December 19, 2026, at least for now or until we learn more.
Narrower Scope of Law
As mentioned above, the Act originally applied to all workers or prospective workers. This is no longer the case. The Act now applies to only employees and prospective employees, meaning the law no longer covers independent contractors, volunteers, interns, or sole proprietors. An “employee” is defined as “any person employed for hire by an employer in any employment.”
Exceptions to Coverage
The amendment also tells us that certain employer/employee repayment promises don’t violate the law:
- Payment for property sold or leased by the employer to the worker;
- Repayment for a financial bonus, relocation assistance, or other non-educational incentive not tied to specific job performance, unless the employee was terminated for any reason other than misconduct or the employer misrepresented the duties or requirements of the job;
- Any terms or conditions relating to an educator’s use of sabbatical leave;
- Payment programs that are collectively bargained;
- Agreements that require an employee to reimburse the employer for the cost of tuition, fees, and required educational materials for a transferable credential, subject to additional requirements.
A transferable credential is any documented evidence of a skill (such as a degree, diploma, or license) that employers in that industry or profession recognize as a qualification for employment, independent of the employer’s specific business practices.
To be enforceable, a repayment agreement that requires an employee to repay tuition costs, fees, or educational materials related to a transferable credential must meet the following conditions:
- Must be in writing and separate from an employment contract;
- Cannot require the employee to get the transferable credential as a condition of employment;
- The repayment amount is specified before the employee agrees to the contract, and the repayment amount doesn’t exceed the cost to the employer of the tuition, fees, and 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 employment;
- The employee is not required to repay the employer if the employee is terminated, unless the termination is for misconduct.
Enforcement
The Act still doesn’t provide for a private right of action, meaning an individual can’t sue for damages as a result of the law. However, it gives an employee who’s sued by her employer the right to defend against a collections claim and to recover attorneys’ fees if the defense is successful. If an employer violates the Act, the New York State Department of Labor can impose civil penalties between $1,000–$5,000 per violation.
Practice Pointers
Because the amendment has delayed the effective date until at least December 2026, employers should take this added time to review their records and employment agreements, including:
- Audit Agreements: Review existing agreements. Seek counsel to ensure compliance and avoid risk.
- Reconsider retention arrangements: Restructure arrangements so incentives aren’t tied to specific job performance and don’t require repayment when employment ends, unless for termination.
- Assess templates and SOPs: Any pay-on-departure obligation is presumptively prohibited unless an exception applies. Keep in mind the additional hurdles for making a repayment agreement related to training programs enforceable.
If you have any questions or concerns, feel free to reach out. The Coppola Firm is here to keep you up to date on what you need to know.
As always, we’ll follow this issue closely will be alert to any changes at the federal or New York State governments.
Call us at 716.839.9700 or email us at info@coppolalegal.com.
