Avoiding the Trap: What New York’s “Trapped at Work” Law Means for Your Organization
New York lawmakers have sent a clear message to employers to kick off the new year: workers should not feel trapped at work. With the enactment of the Trapped at Work Act, New York now restricts the use of stay-or-pay provisions that can leave workers financially trapped in jobs that they would otherwise leave.
The law took effect immediately on December 19, 2025, and while some proposed amendments may soften its impact, employers should assume, for now, that the trapdoor is open.
Here’s what you need to know, and what to do next.
What the Law Prevents: At its core, the Act reflects a policy that employees should not be locked into a job by the threat of having to repay money. The law prohibits employers from requiring workers or applicants to sign employment promissory notes as a condition of employment. These are agreements or provisions of contracts that require reimbursement if the worker leaves before a certain date and are often tied to training or onboarding costs and employer-paid certifications or programs.
While there are some exceptions, including agreements negotiated as part of collective bargaining, generally, if a provision functions as a financial penalty for leaving, regulators are likely to view it as a prohibited trap. The law applies broadly and extends beyond employees to independent contractors, interns, and volunteers.
Why This Matters: Many employers use promissory notes responsibly to protect legitimate investments and not to restrain worker mobility. The problem is that the Act as written contains several ambiguities and does not clearly distinguish between exploitive traps and standard business practices. As a result, certain common arrangements are now likely violative of the law, including:
Sign-on bonuses with repayment requirements.
Relocation expense reimbursements tied to remaining with the employer for a fixed period.
Tuition or education assistance tied to continued employment.
Further, it is unclear whether the Act applies retroactively to promissory notes executed before the Act’s effective date. Until there is further legislative clarification, however, employers should assume that any provision requiring repayment because an individual leaves their job may be subject to scrutiny.
Is There a Way Out of the Trap? Recognizing the uncertainty that the Act created, lawmakers have already introduced proposed amendments that would:
Delay enforcement of the Act until December 2026.
Carve-out exceptions for sign-on bonuses, tuition-repayment, and relocation assistance.
Outline enforcement considerations for the Department of Labor.
Narrow the scope of who is covered.
However, these amendments are not yet law. The safest approach for now is to comply with the Act as currently written.
What You Should Be Doing Now: To avoid getting caught in the trap, we recommend the following steps:
Review existing agreements to identify any employment, contractor, or incentive agreement that includes any type of repayment obligations triggered by separation.
Pause new repayment requirements and avoid new stay-or-pay provisions.
Rethink retention strategies and shift from penalties for leaving to incentives for staying, such as milestone bonuses or forward-thinking compensation structures.
Monitor legislative developments because the rules may quickly change again (we’ll handle this part).
While the Act currently does not have a private right of action, it is still enforced by the New York Department of Labor, which can assess civil penalties ranging from $1,000 to $5,000 per violation. Further, the Act allows workers to recover attorneys’ fees if they successfully defend against an employer’s attempt to enforce such a promissory note.
