New York employers will need to rethink how they structure job agreements heading into 2026. A new state law signed in December bans employment clauses that require workers to repay their employer if they leave a job early — a practice the state says unfairly restricts worker mobility, according to The HR Digest.
The legislation, known as the NY Trapped at Work Act, was signed into law on December 19 by Governor Kathy Hochul. It targets so-called “stay or pay” agreements, which have been increasingly used to tie employees to their jobs through financial penalties.
A Change in Employment Contract Standards
At the center of the law are employment promissory notes, which are contract provisions that require workers to either remain in their role for a set period or repay money if they resign sooner. These clauses have commonly been linked to onboarding, training, or upfront employer costs.
Under the new law, these provisions are no longer allowed as a condition of employment in New York state. The state has deemed them unenforceable and contrary to public policy, even when embedded in otherwise valid agreements.
Broad Coverage Across the Workforce
The ban applies statewide and covers both public and private employers. It also extends beyond traditional full-time employees, including independent contractors, interns, apprentices, and volunteers.
In effect, most workers in New York are now protected from early-departure repayment requirements.
Limited Circumstances Still Allowed
The law does not eliminate all repayment arrangements. Employers may still recover certain costs, including non-training-related advance payments, employer property sold or leased to workers, specific sabbatical agreements in education, and terms negotiated through collective bargaining.
These exceptions are narrow and do not permit the use of standard “stay or pay” clauses.
Enforcement and Open Questions
Violations can result in civil penalties of $1,000 to $5,000 per incident, enforced by the New York State Department of Labor. While the law does not create a direct right for workers to sue, employees may recover legal fees if they successfully defend against employer claims.
It remains unclear whether agreements signed before December 19, 2025, will be affected. What is certain is that no new contracts containing these provisions can be enforced going forward.
What This Means for Employers
The change is expected to prompt widespread contract reviews across New York. Employers will need to revise offer letters, employment agreements, and recruiting templates to remove prohibited language. Organizations that relied heavily on these clauses may also face broader policy and operational adjustments.
