In response to concerns raised by Governor Kathy Hochul and stakeholders in the employment sector regarding ambiguities in the Trapped at Work Act, the New York Legislature has quickly introduced Chapter Amendments (A.9452/S.8822) to clarify and refine the law’s scope and application. Notably, the amendments – introduced on January 6, 2026 – would limit coverage to “employees” and carve out exceptions for tuition repayment agreements and certain non-educational repayment agreements, such as bonuses and relocation payments not tied to specific job performance, provided the employee is not terminated for reasons other than misconduct or the employer misrepresented the job’s duties and requirements. The amendments would also postpone the Act’s effective date from December 19, 2025 to December 19, 2026.
Overview of the Trapped at Work Act
As we previously covered, on December 19, 2025, Governor Kathy Hochul signed the Trapped at Work Act (the “Act”) into law, prohibiting employers from requiring any worker or prospective worker to sign agreements that obligate the individual to repay moneys paid by the employer if the worker leaves before a designated period. These agreements – commonly referred to as “stay-or-pay” agreements – are deemed unconscionable, contrary to public policy, and unenforceable under New York law.
The Act is notable for its expansive scope, which drew criticism for both its ambiguities and the breadth of its coverage. For purposes of analyzing the proposed amendments, the following key provisions are particularly relevant:
- Effective Date: The Act became effective immediately upon being signed into law on December 19, 2025.
- Covered Persons: The Act applies to “worker[s],” which is defined as any “individual who is permitted to work for or on behalf of an employer,” including employees, independent contractors, externs and interns, volunteers, apprentices, and sole proprietors providing services.
- Scope of Permissible Agreements: Employers may not require workers to execute an “employment promissory note” as a condition of employment, which is defined as “any instrument, agreement, or contract provision that requires a worker to pay the employer . . . a sum of money if the worker leaves such employment before the passage of a stated period of time” and specifically includes “reimbursement for training provided to the worker,” whether by the employer or a third party.
- Specific Exceptions: The Act provides several exceptions to its prohibition on “employment promissory notes.” These include: repayment of non-training advances; payment for any property that the employer has sold or leased to a worker; sabbatical leave terms for educational personnel; and agreements that result from collective bargaining negotiations between the employer and the worker’s representative.
- Enforcement: The Act does not grant workers a private right of action. Enforcement rests with the New York State Department of Labor (NYSDOL), which may impose civil penalties ranging from $1,000 to $5,000 per violation.
As the law took effect, its sweeping language and the uncertainty surrounding its enforcement and coverage generated significant discussion among employers, practitioners, and stakeholders.
Summary of Proposed Amendments
On January 6, 2026, the New York Legislature introduced Chapter Amendments (the “Amendments”) to the Act – a legislative mechanism allowing Governor Hochul to sign a bill into law conditioned on the legislature’s agreement to make specified changes during the next legislative session. Among other things, the Amendments suggest the following changes:
- Effective Date: The Amendments push back the effective date by a year to December 19, 2026, which would provide employers time to make changes to existing agreements.
- Covered Persons: The Act would apply only to “employees,” which the Amendments define as “any person employed for hire by an employer in any employment.” Employers would be free to use promissory notes with independent contractors, externs and interns, volunteers, apprentices, and sole proprietors providing services.
- Specific Exceptions: The Act establishes several additional exceptions to its prohibition on employment promissory notes.
- Bonuses, Relocation Costs, and Non-Educational Incentives: One key exception allows repayment agreements requiring employees to repay financial bonuses, relocation assistance, or other “non-educational” incentives or benefits that are not tied to specific job performance. These agreements are permissible so long as the repayment requirement is not triggered if the employee is terminated for reasons other than misconduct, or if the job’s requirements or duties were misrepresented to the employee.
- Voluntary Educational-Repayment: Another exception applies to voluntary tuition-repayment agreements related to “transferable” educational credentials. Transferable credentials are defined as degrees, diplomas, licenses, certificates, or documented skill proficiencies or course completions that are “widely recognized” in the relevant industry or “enhance the employee’s employability with other employers in the relevant industry.” Importantly, the Amendments specifically exclude employer-specific or legally mandated safety or compliance training from these exceptions. The Amendments also require that these agreements be separate from any employment contract, set out a prorated repayment schedule that is not accelerated upon separation, and do not provide for repayment if the employee is terminated for reasons other than misconduct.
- Enforcement: The proposed Amendments require the NYDOL to consider employer size, good-faith compliance, and the severity of the violation when assessing the amount of the penalties (which range from $1,000 to $5,000 per violation). The Amendments do not change the provision barring a private right of action.
While the Act clarifies several ambiguities we previously raised – including signing bonuses, relocation allowances, tuition assistance, professional licensing or certification fees, and continuing education – some questions remain. Notably, the Act does not expressly state whether its provisions apply to agreements signed before the Act’s effective date, leaving open the question of how the NYDOL may treat pre-existing employment promissory notes under the new framework. It also remains unclear whether certain educational expenses – such as exam fees – are covered by the “transferable credential” exception, and how broadly the term “widely recognized” will be interpreted in determining which credentials qualify.
Key Takeaways for Employers
Sheppard is closely monitoring the progress of these Amendments and any forthcoming guidance related to the Act. New York employers should promptly review and, where necessary, revise offer letters, employment agreements, and any other agreements containing “stay-or-pay” language to address these Amendments. We remain available to advise and support employers as they navigate these evolving requirements, review and revise employment agreements and any other contracts containing “stay-or-pay” provisions.