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Many employers use agreements designed to protect their investment in employees—particularly when providing training, relocation assistance, or sign-on bonuses. A new New York law known as the “Trapped at Work Act” will affect how some of those arrangements can be structured.
The law generally prohibits employers from requiring workers to sign agreements that obligate them to repay money if they leave employment before a specified period of time. The law refers to these arrangements as “employment promissory notes,” defined broadly as any agreement, contract provision, or instrument that requires an employee to pay money to the employer if the employment relationship ends before a stated period of time.
For employers, the practical impact is straightforward: certain repayment obligations tied to continued employment may no longer be enforceable under New York law.
When the Law Takes Effect
The law was originally set to take effect immediately in December 2025. However, amendments signed on February 13, 2026 delayed implementation. As currently structured, the law is expected to take effect on February 13, 2027, giving employers additional time to review and revise their agreements.
Many organizations that use templates or standard offer letters that should review those documents before the law takes effect.
Agreements Most Likely to Be Affected
Because the definition of an employment promissory note is broad, several types of agreements commonly used in hiring and retention may be affected.
Training repayment agreements
Some employers require employees to reimburse the cost of training if they leave within a certain period. The law specifically targets provisions requiring repayment for training provided by the employer or arranged through a third party. This could affect industries where training investments are substantial, including skilled trades, healthcare, transportation, and technology roles requiring certifications.
Sign-on or retention bonuses with repayment clauses
Sign-on bonuses are often structured so that employees must repay the bonus if they leave within a defined period. Because these arrangements involve repayment tied to continued employment, they should be reviewed carefully to ensure they comply with the new law.
Relocation assistance
Employers sometimes provide relocation benefits that must be repaid if an employee leaves before a certain date. Depending on how those agreements are structured, they may fall within the scope of the new law.
Equipment or technology reimbursement
Some employers require employees to reimburse the cost of specialized equipment or technology if they leave early. These agreements may also warrant review if repayment is triggered solely by the end of employment.
Limited Exceptions
The law includes several exceptions. Certain agreements involving relocation assistance, financial bonuses, or other incentive payments may still be permissible in specific circumstances.
In certain situations—such as termination for misconduct or material misrepresentation—repayment provisions may still apply, but these are narrow, case-specific exceptions and not a substitute for properly structured agreements.
Tuition reimbursement tied to a transferable educational credential may also be allowed if strict conditions are met, including that the agreement is separate from the offer of employment and that repayment is limited to the employer’s actual educational costs.
Enforcement
Violations of the Trapped at Work Act may be enforced through administrative complaints filed with the New York State Department of Labor. Civil penalties may range from $1,000 to $5,000 per violation.
What Employers Should Do Now
With the law scheduled to take effect in February 2027, employers should begin reviewing any agreements or policies that involve repayment obligations tied to continued employment.
In particular, employers should examine:
• Offer letters
• Training reimbursement agreements
• Sign-on bonus agreements
• Relocation assistance agreements
• Employee handbook policies addressing repayment provisions
Many businesses will find that arrangements they have used for years—especially those requiring repayment if an employee leaves within a specified period—should be revised before the law takes effect. This is exactly the type of issue that shows up during an HR audit—policies and agreements that worked yesterday but may not hold up tomorrow.
The Bottom Line
The Trapped at Work Act does not prevent employers from offering bonuses, training, or other benefits.
What changes is the ability to require repayment simply because an employee leaves within a set period of time. As a general rule, if repayment is triggered solely by the timing of an employee’s departure, the arrangement is likely to be problematic under the new law.
If you would like HR One to review any existing agreements or policies that may be impacted by the law, please reach out to your consultant or get in touch.
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