New York's Trapped at Work Act: What Employees Need to Know About 2026 Changes

The short version: New York’s Trapped at Work Act, Labor Law Article 37, will make any employment promissory note that an employer requires as a condition of employment null and void. A promissory note is any clause requiring an employee to pay the employer money if employment ends before a stated period. The February 13, 2026 chapter amendment narrowed coverage to employees, defined “transferable credential,” rewrote the exceptions for tuition, bonuses, relocation assistance and property, and set the effective date at December 19, 2026. Until that date the act does not apply.

This post is the deep-dive on stay-or-pay clawbacks. For the hub covering the 2026 wage increases, the EEOC guidance rescission, expanded sick-leave rights, credit-check restrictions and disparate-impact codification alongside the Trapped at Work Act, see New York Employment Law Changes 2026: What Workers and Employers Need to Know About EEOC Developments.

An employee who signs a clause promising to repay $5,000 in “training costs” on leaving within eighteen months has signed an employment promissory note. New York has decided that such a note, if required as a condition of employment, is void. The decision takes effect December 19, 2026.

Between now and then the clause is a contract term like any other, and the questions are the ones contract law asks. From December 19, 2026 the questions are the ones Labor Law §§ 1050 to 1055 ask: was the note required as a condition of employment, and does it fit one of the five exceptions in § 1052(2). This article walks through those sections in the statute’s words and says what each means for a Long Island worker reading an offer letter.

Understanding the Trapped at Work Act: Background and Purpose

The act was enacted as chapter 643 of the Laws of 2025 (Assembly Bill A584-C, substituted for S4070-B), signed December 19, 2025, and written to take effect immediately. It added Article 37 to the Labor Law: § 1050 (definitions), § 1051 (scope), § 1052 (the prohibition and its exceptions), § 1053 (enforcement), § 1054 (rules) and § 1055 (savings clause).

The legislature’s judgment is in the statute’s own words. Under Labor Law § 1052(1), “The execution of an employment promissory note as a condition of employment is unconscionable, against public policy, and unenforceable, and any such note shall be null and void.” Under § 1051, the article’s rights and remedies “shall not supersede any other rights and remedies provided by statute or common law.”

Why the Act Was Necessary

The original chapter defined “worker” to include an employee, independent contractor, extern, intern, volunteer, apprentice and sole proprietor, and defined an employment promissory note to include any provision stating that the payment “constitutes reimbursement for training provided to the worker by the employer or by a third party.” The target was the training-repayment clause: a sum owed on departure, labeled as reimbursement, that keeps an employee in place because the employee cannot pay it.

Key Changes in the 2026 Amendments

Chapter 16 of the Laws of 2026 (Assembly Bill A9452, substituted for S8822), signed February 13, 2026, amended §§ 1050, 1052 and 1053 and the effective clause of the 2025 chapter.

Extended Effective Date

The 2025 chapter took effect immediately on December 19, 2025. Chapter 16, § 4, amended that clause to read “one year after it shall have become a law.” The act therefore takes effect December 19, 2026. That is the only effective date; the act was never set for April 2026 and is not set for February 13, 2027. Until December 19, 2026 an existing agreement is governed by contract law, and the statute does not say whether it will reach a note signed before that date.

Narrowed Scope with Specific Exceptions

The amendment made four structural changes.

First, coverage. “Worker” became “employee,” defined in § 1050(2) as “any person employed for hire by an employer in any employment.” Independent contractors, interns and volunteers, whom the 2025 text named, are no longer within the article. “Employer” in § 1050(1) now means any person, corporation, limited liability company or association employing any individual in any occupation, industry, trade, business or service, “including the state and its political subdivisions.” A worker labeled a contractor but controlled like an employee may still be an employee under the common-law test in Bynog v. Cipriani Group, 1 N.Y.3d 193 (2003).

Second, the definition. An employment promissory note under § 1050(3) is “any instrument, agreement, or contract provision that requires an employee to pay the employer, or the employer’s agent or assignee, a sum of money if the employee’s employment relationship with a specific employer terminates before the passage of a stated period of time.” The sentence expressly including training reimbursement was deleted; training repayment is still covered, because it is a sum owed on termination, but it is now handled through the transferable-credential exception.

Third, a new defined term. Under § 1050(4), a “transferable credential” is “any degree, diploma, license, certificate, or documented evidence of skill proficiency or course completion that is widely recognized by employers in the relevant industry as a qualification for employment, independent of the employer’s specific business practices, or that provides skills or qualifications that demonstrably enhance the employee’s employability with other employers in the relevant industry.” It does not include employer-specific training (instruction in the employer’s proprietary processes, systems, internal policies, software or equipment, or instruction that does not qualify the employee for a new occupational title, classification or industry-recognized credential) or mandated safety and compliance training (any training required by law to maintain workplace safety, “including but not limited to OSHA certifications, sexual harassment prevention, or diversity training”).

Fourth, the exceptions. The 2025 text excepted repayment of sums advanced (unless used for job-related training), payment for property sold or leased, sabbatical terms and collectively bargained programs. Section 1052(2) as amended lists five:

• tuition, fees and required educational materials for a transferable credential, on the five conditions in § 1052(2)(a) set out below;
• payment for property the employer sold or leased to the employee, “as long as such sale or lease was voluntary” (§ 1052(2)(b));
• repayment of “a financial bonus, relocation assistance, or other non-educational incentive or other payment or benefit that is not tied to specific job performance, unless the employee was terminated for any reason other than misconduct or the duties or requirements of the job were misrepresented to the employee” (§ 1052(2)(c));
• terms and conditions of sabbatical leaves granted to educational personnel (§ 1052(2)(d)); and
• an agreement “entered into as part of a program agreed to by the employer and its employees’ collective bargaining representative” (§ 1052(2)(e)).

Documentation Requirements for a Tuition Agreement

The act has no general reasonableness or proportionality test. What it has, for a tuition agreement, is the list in § 1052(2)(a). The agreement survives only if it meets all of the following:

• it is “set forth in a written contract that is offered separately from any contract for employment” (§ 1052(2)(a)(i));
• it “does not require the employee to obtain the transferable credential as a condition of employment” (§ 1052(2)(a)(ii));
• it “specifies the repayment amount before the employee agrees to the contract,” and that amount “does not exceed the cost to the employer of the tuition, fees, and required educational materials for the transferable credential received by the employee” (§ 1052(2)(a)(iii));
• it “provides for a prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period and does not require an accelerated payment schedule if the employee separates from the employment” (§ 1052(2)(a)(iv)); and
• it “does not require repayment to the employer by the employee if the employee is terminated, except if the employee is terminated for misconduct” (§ 1052(2)(a)(v)).

An agreement that fails any one condition is outside the exception, and if it was required as a condition of employment it is void under § 1052(1).

Stay-or-Pay Provisions: What Is Permitted and What Is Prohibited Under the Amended Act

Clawback type	Before December 19, 2026	On and after December 19, 2026	Where in the statute
Training repayment for employer-specific training (proprietary systems, internal policies, no new title or industry credential)	Contract law	Not a transferable credential; a note requiring repayment as a condition of employment is void	§ 1050(4)(a); § 1052(1)
Training repayment for legally required safety or compliance training (OSHA certifications, sexual harassment prevention, diversity training)	Contract law	Not a transferable credential; void on the same terms	§ 1050(4)(b); § 1052(1)
Tuition, fees and materials for a transferable credential (a degree, license or industry-recognized certificate)	Contract law	Permitted only if all five conditions in § 1052(2)(a) are met	§ 1050(4); § 1052(2)(a)
Signing bonus, retention bonus, relocation assistance or other non-educational incentive not tied to specific job performance	Contract law	Repayment permitted, except where the employee was terminated for any reason other than misconduct or the job was misrepresented	§ 1052(2)(c)
Property the employer sold or leased to the employee	Contract law	Payment permitted if the sale or lease was voluntary	§ 1052(2)(b)
Sabbatical terms for educational personnel	Contract law	Permitted	§ 1052(2)(d)
Repayment program in a collective bargaining agreement	Contract law	Permitted	§ 1052(2)(e)
Deductions from the final paycheck for any of the above	Labor Law § 193(1) allows only deductions authorized by law or expressly authorized in writing by the employee for the employee’s benefit within the listed categories; § 193(2) bars any other charge against wages or payment by separate transaction	Unchanged; Article 37 does not amend § 193	Labor Law § 193

Here is what that means for a note signed before the effective date. Until December 19, 2026 the note is enforced or not under contract law, including any unconscionability or public-policy defense a court would entertain. From December 19, 2026, § 1052(1) declares a note required as a condition of employment void without a date limit, § 1051 preserves other rights and remedies, and the statute says nothing about notes signed earlier. Whether the act reaches an older note when enforcement is sought after December 19, 2026 is a question the text does not answer.

What Remains Prohibited Under the Amended Act

Training Costs That Primarily Benefit the Employer

Under § 1050(4), instruction in the employer’s proprietary processes, systems, internal policies, software or equipment, instruction that does not qualify the employee for a new occupational title or industry-recognized credential, and any training required by law to maintain workplace safety are not transferable credentials. A clause requiring repayment for that training, required as a condition of employment, is an employment promissory note with no exception to fit into, and is void under § 1052(1) once the article is in effect.

Excessive or Unreasonable Penalties

The act does not ask whether a repayment amount is reasonable. For a tuition agreement it asks whether the amount was specified before the employee agreed and whether it exceeds the employer’s cost of tuition, fees and required materials (§ 1052(2)(a)(iii)); whether repayment is prorated over the required period without acceleration on separation (§ 1052(2)(a)(iv)); and whether repayment is demanded after a termination for anything other than misconduct (§ 1052(2)(a)(v)). A tuition clause with an unstated amount, a lump sum owed in full whenever the employee leaves, or a figure above the employer’s cost fails the exception.

Discrimination and Retaliation

Article 37 contains no anti-retaliation clause of its own. Retaliation is never one statute, and the statutes that apply are these.

Labor Law § 215(1)(a) forbids an employer from discharging, threatening, penalizing or in any other manner discriminating or retaliating against an employee because the employee complained, to the employer or to anyone else, about conduct the employee reasonably and in good faith believes violates any provision of the Labor Law. From December 19, 2026 a complaint about an employment promissory note is a complaint about the Labor Law. Under § 215(2)(a) the employee may sue within two years for an injunction, reinstatement or front pay, lost compensation and damages, liquidated damages of up to $20,000, costs and attorney’s fees.

Labor Law § 740 is the whistleblower statute. Under § 740(2) an employer may not take retaliatory action because an employee discloses or threatens to disclose, to a supervisor or a public body, an activity, policy or practice the employee reasonably believes violates a law, rule or regulation, or objects to or refuses to participate in it. Under § 740(1)(e), retaliatory action includes “threats to take such adverse employment actions” and actions “that would adversely impact a former employee’s current or future employment.” The action is brought within two years under § 740(4)(a), with a jury under § 740(4)(b), and relief under § 740(5) includes reinstatement or front pay, lost wages and benefits, attorney’s fees, a civil penalty of up to $10,000 and punitive damages if the violation was willful, malicious or wanton. Section 740(1)(a) also covers natural persons employed as independent contractors, whom Article 37 does not.

A repayment demand that follows a wage complaint or a harassment report is conduct those definitions describe; whether it was made because of the complaint is a question of proof. A demand that follows a discrimination complaint is governed by Executive Law § 296(7), which forbids retaliation for opposing a forbidden practice, filing a complaint, testifying or assisting in a proceeding, or requesting a reasonable accommodation. Public employees, whom Article 37 covers through the “state and its political subdivisions” language in § 1050(1) but whom § 215(1)(c) excludes from § 215, use Civil Service Law § 75-b. The retaliation and wrongful termination pages cover the proof.

How the Changes Affect Different Types of Employment Agreements

Healthcare and Professional Licensing

A nursing license, a specialty certification or another credential “widely recognized by employers in the relevant industry as a qualification for employment” is a transferable credential under § 1050(4), and a separate written agreement to repay its tuition, fees and materials can survive if it meets all five § 1052(2)(a) conditions. Orientation, instruction in the facility’s own systems and any legally required safety training are not transferable credentials, and a note requiring their repayment as a condition of employment is void from December 19, 2026.

Technology and Skilled Trades

An industry-recognized certification obtained through an outside program can be the subject of a § 1052(2)(a) agreement. Training in the employer’s proprietary software or equipment, and instruction that “consists of skillful variations of general processes known to the relevant trade or industry” without a new title or credential, cannot. A repayment program negotiated into a collective bargaining agreement is outside the article under § 1052(2)(e); an individual note imposed on a union member outside any negotiated program is not.

Sales and Customer Service

A certification with value across the industry can be covered by a § 1052(2)(a) agreement. Product training and instruction in the employer’s own sales process do not qualify the employee for a new occupational title or industry-recognized credential and are not transferable credentials.

Red Flags: Identifying Potentially Unlawful Agreements

The statute supplies the checklist. A clause that shows any of the following will not fit the § 1052(2)(a) exception once the article is in effect.

Excessive Duration

The act sets no maximum period. It requires that repayment be prorated over the required employment period, proportional to the total and the length of the period, with no accelerated schedule on separation (§ 1052(2)(a)(iv)). A three-year clause that reduces the balance each month can meet that condition; an eighteen-month clause owed in full on the last day cannot.

Vague or Inflated Costs

The repayment amount must be specified before the employee agrees, and may not exceed the employer’s cost of the tuition, fees and required educational materials for the credential the employee received (§ 1052(2)(a)(iii)). An agreement with no figure, or a figure that includes supervision time, lost productivity or a “training value” above the employer’s actual cost, fails the condition.

All-or-Nothing Terms

Full repayment regardless of tenure fails the proration condition in § 1052(2)(a)(iv). Repayment after a layoff or a termination for anything other than misconduct fails § 1052(2)(a)(v). For a bonus or relocation clause, § 1052(2)(c) removes the repayment obligation where the employee was terminated for any reason other than misconduct or the job was misrepresented.

Broad Application

A single clause covering “all training” sweeps in employer-specific and legally required training that § 1050(4) excludes from the definition of a transferable credential. The exception also requires a written contract “offered separately from any contract for employment” (§ 1052(2)(a)(i)) and a credential that is not a condition of employment (§ 1052(2)(a)(ii)); a repayment paragraph inside the offer letter fails the first, and a required certification fails the second.

What Long Island Workers Should Do Before December 19, 2026

A repayment demand usually arrives with the final paycheck. Read the paycheck as well as the note. Labor Law § 193(1) permits only deductions authorized by law or expressly authorized in writing by the employee for the employee’s benefit within the categories the section lists, and § 193(2) bars any other charge against wages or payment by separate transaction. A claim for unpaid wages under Labor Law § 198(3) reaches back six years, and under § 198(1-a) it carries attorney’s fees, prejudgment interest and, unless the employer proves a good-faith basis, liquidated damages of 100 percent. A worker facing a clawback may hold a wage claim larger than the sum demanded.

Review Current Employment Agreements

1. Identify every clause that requires payment to the employer if employment ends before a stated period; that is the § 1050(3) definition.
2. Note what the payment is for: tuition for a credential recognized outside the company, the employer’s own training, a bonus, relocation assistance or property.
3. Test any tuition clause against the five § 1052(2)(a) conditions and any bonus or relocation clause against § 1052(2)(c).
4. Keep the signed agreement, the training records and every message about repayment.

Negotiate New Agreements

For an offer received before December 19, 2026, ask for the terms the statute will require after that date: a separate written agreement, a credential that is not a job condition, a stated amount no higher than the employer’s cost, monthly proration with no acceleration, and no repayment after a termination for anything other than misconduct. An employer that will not put those terms in writing is asking for a note the act will void.

Understand Your Rights

Until December 19, 2026 the clause is a contract term, and contract defenses, including unconscionability, are what a court would consider. Under § 1051 the act does not displace those defenses after that date. Discrimination and retaliation statutes apply regardless of what the contract says: Executive Law § 296(7), Labor Law § 215 and § 740, and for public employees Civil Service Law § 75-b.

How Employers Can Comply by December 19, 2026

Contract Review and Revision

Every agreement that requires payment on separation should be sorted into a § 1052(2) exception or removed. A tuition clause needs the five § 1052(2)(a) terms, in a contract separate from the employment contract. A bonus or relocation clause needs the § 1052(2)(c) carve-out for terminations other than for misconduct and for misrepresented jobs. A note that fits no exception and is required as a condition of employment will be void, and under § 1053(2) each employee required to sign one, or against whom the employer seeks to enforce one, is a separate violation.

Training Program Restructuring

Only a transferable credential under § 1050(4) can carry a repayment obligation. Onboarding, instruction in proprietary systems and legally required safety and compliance courses cannot, however they are labeled.

Documentation Improvements

The repayment amount must be stated before the employee signs and capped at the employer’s actual cost of tuition, fees and required materials (§ 1052(2)(a)(iii)). The employer therefore needs a record of that cost, credential by credential, and a proration schedule that satisfies § 1052(2)(a)(iv). Under § 1053(2) the commissioner, in setting a penalty, considers “the good faith basis of the employer to believe that its conduct was in compliance with the law,” and the written record is how that basis is shown.

What To Do If You Believe Your Rights Have Been Violated

Document the Situation

Keep copies of every employment agreement and training document, a record of what the training covered and whether it produced a credential recognized outside the employer, every demand for repayment, and every communication about it.

Seek Legal Advice

The questions are specific: whether the clause is an employment promissory note under § 1050(3), whether it was required as a condition of employment, whether the training is a transferable credential under § 1050(4), whether a tuition clause meets all of § 1052(2)(a), and whether a demand followed protected activity under § 215, § 740 or Executive Law § 296(7). A lawyer answers them from the documents.

Know Your Deadlines

From December 19, 2026, an employee sued on a note the act voids recovers attorney’s fees on a successful defense under § 1053(1), and an aggrieved employee may file a complaint with the commissioner under § 1053(2); the commissioner may fine the employer $1,000 to $5,000 for each violation. A retaliation action under Labor Law § 215(2)(a) or § 740(4)(a) must be brought within two years. A wage claim under Labor Law § 198(3) must be commenced within six years.

The Future of Employment Mobility in New York

Two dates matter. On December 19, 2026, Labor Law Article 37 takes effect and an employment promissory note required as a condition of employment becomes void unless it fits § 1052(2). Separately, S9759, a bill to prohibit non-compete agreements and certain other restrictive covenants, passed the Senate on June 3, 2026 and was referred to the Assembly Labor Committee the same day, where it remained as of the Open Legislation record fetched September 22, 2026; it is not law. The Trapped at Work Act does not reach non-competes, which restrict where an employee may work next and require no payment; those remain governed by court-made reasonableness rules.

Contact Us for Help With Employment Law Issues

If you are facing a repayment demand, weighing a job change with a stay-or-pay clause, or reading an offer letter with a training-repayment paragraph, the Law Office of Jason Tenenbaum, P.C. can tell you which rule governs the clause on the date that matters and what the documents show. Our employment law practice represents Long Island workers in discrimination, retaliation and wage matters.

Call 516-750-0595 for a free consultation.

Related Reading

• New York Employment Law Changes 2026: What Workers and Employers Need to Know About EEOC Developments: the umbrella post on the 2026 wage floor, sick-leave expansion, credit-check restrictions and disparate-impact codification alongside the Trapped at Work Act.
• Workplace Retaliation Claims Surge in New York: What Employees Need to Know About Rising 2026 Trends: when a clawback demand follows a wage complaint or whistleblower report and becomes a claim under Labor Law § 215 or § 740.
• Cheeks Fairness Hearings (2026): How FLSA Settlements Get Approved (or Rejected) in the Second Circuit: how a federal wage claim that arises from a contested stay-or-pay demand is settled.

Related Practice Areas

For a deeper look at the firm’s coverage of related topics:

• Long Island Wage and Hour Attorney

• Long Island Employer Retaliation Attorney

• Long Island Wrongful Termination Attorney

• FAQ: 37 questions across 7 practice areas

• [Legal Encyclopedia: NY no-fault, personal injury, and employment-law glossary](/legal-encyclopedia/)

Authoritative External Resources

• U.S. Equal Employment Opportunity Commission (EEOC): federal anti-discrimination enforcement
• U.S. Department of Labor: Fair Labor Standards Act: federal wage-and-hour rules
• New York Division of Human Rights: state anti-discrimination charges
• New York Department of Labor: Wage and Hour Laws: NYLL framework and Wage Theft Prevention Act

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Last reviewed: September 2026.