What Employers Need to Know About New York State’s Trapped at Work Act

Workers Cannot Be Required to Repay Certain Advances, Stipends, or Reimbursements if Leaving a Job Before a Set Amount of Time

Does your business require employees who leave before a set period of time to repay the business certain advances, stipends, or reimbursements the employee received—such as for training costs? If your business is located in New York State, a major development in New York Labor Law may apply.

On December 19th, 2025, Governor Kathy Hochul signed the “Trapped at Work Act” (the “Act”) into law. The Act, which takes effect immediately, mandates that “no employer may require, as a condition of employment, any worker or prospective worker to execute an employment promissory note.” If any employment promissory notes are executed, the “note shall be null and void.”

Who Is Affected by the Trapped at Work Act?

The Act broadly defines an affected “employer” as “an individual, partnership, association, corporation, limited liability company, trust, government or government subdivision, or any organized group that hires or contracts with a worker to work for the employer.”

An affected “worker” is also broadly defined to include “an employee, independent contractor, extern, intern, volunteer, apprentice, sole proprietor . . . [or] an individual who provides service through a business or nonprofit entity or association.” Individuals who solely interact with an employer as a vendor of goods are not considered “workers” for purposes of the Act.

What Does the Act Prohibit?

The Act prohibits any covered employer from requiring a worker to execute an employment promissory note as a condition of the worker’s employment.

An “employment promissory note” is defined as “any instrument, agreement, or contract provision that requires a worker to pay the employer, or the employer’s agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time.”

The Act specifically notes that this definition includes “any such instrument, agreement, or contract provision which states such payment of moneys constitutes reimbursement for training provided to the worker by the employer or by a third party.”

Exceptions to the Act

Notably, the Act lists four distinct categories of agreements between workers and employers that are not prohibited:

1. An agreement that “requires the worker to repay to the employer any sums advanced to such worker by the employer, unless such sums were used to pay for training related to the worker’s employment with the employer” (emphasis added).
2. Agreements requiring a worker to pay the employer for any property it has sold or leased to such worker.
3. Agreements requiring educational personnel to comply with sabbatical leaves.
4. Agreements entered into as part of an applicable collective bargaining agreement.

Future agreements between employers and workers that seek to include employee repayment provisions must be carefully drafted to ensure that the language of each agreement falls within one of these four exceptions.

Consequences of Violating the Act

If an employer is found to have required a worker to execute an employment promissory note in violation of the Act, the New York State Department of Labor may issue a fine ranging from at least $1,000 up to a maximum of $5,000.

Notably, each individual agreement that an employer executes with a worker constitutes a separate violation of the Act, which may be fined separately. This means that if an employer were to execute multiple employment promissory notes with various employees, a fine between $1,000-$5,000 could be imposed for each prohibited agreement.

Employees do not have a private right of action to sue an employer for violations of the Act. However, workers may recover “attorney’s fees upon a successful defense” of any action where an employer sues an employee based on a promissory note that violates the Act.

Current Ambiguities Within the Act

Although the Act is currently in effect, the New York State Department of Labor has yet to issue any guiding regulations pursuant to the Act. Thus, any ambiguities within the Act remain uncertain, pending additional guidance.

For example, it is unclear based on the text of the Act alone whether it applies retroactively to agreements entered into before December 19, 2025. If the Act does apply retroactively, employers will likely be extremely limited in enforcing such agreements.

Gov. Hochul herself noted this lack of clarity in the Act and stated that her signature was based on her “agreement with the Legislature to address these concerns in the upcoming legislative session.”

However, until these ambiguities are addressed, employers must rely on interpreting the text of the Act itself. Phillips Lytle will continue to track statutory updates and can assist employers with interpreting and applying the Act to the employer’s unique needs.

How to Proceed

Moving forward, New York employers should carefully review all policies, onboarding materials, and agreements for potential repayment provisions that violate the Act. Employers should also keep alert for forthcoming guidance from the New York State Legislature and/or New York State Department of Labor, which may further clarify which agreements are impacted and how employers are expected to comply with the Act.

Phillips Lytle’s experienced Labor and Employment attorneys can assist in drafting or reviewing repayment agreements to ensure compliance with the Act.