New York Amends “Trapped at Work” Act: Stay-or-Pay Agreements Now Delayed Until 2027

The amendment clarifies the law’s scope, expands permissible exceptions, and delays the effective date until February 13, 2027, giving employers additional time to review and adjust their contracts.

This update is critical for employers who include repayment clauses in employee agreements, such as tuition reimbursement, relocation bonuses, or other incentive programs. Here’s what you need to know.

What the Trapped at Work Act Covers

Originally effective immediately after its signing on December 19, 2025, the Act prohibits employers from requiring employees or prospective employees to pay the employer (or its agent) a sum of money if they leave employment before a specified period. These agreements are commonly referred to as stay-or-pay agreements.

The amendment clarifies the scope and makes it clear that the Act applies to agreements requiring repayment regardless of whether the employee or employer ends the employment relationship.

Key Changes in the Amendment

1. Clarified Scope

- Applies only to employees or prospective employees, not all workers.

- Covers repayment agreements triggered by any termination, whether voluntary or involuntary.

2. Expanded Exceptions

The amendment permits repayment in certain circumstances, provided specific conditions are met. These include:

- Educational reimbursements. Tuition, fees, or required materials for transferable credentials are allowed if: The agreement is in a separate written contract; obtaining the credential is optional, not required for employment; repayment amounts are specified upfront and do not exceed actual costs; repayment is prorated based on employment duration; no repayment is required if the employee is terminated except for misconduct

- Property sold or leased to employees (if voluntary)

- Repayment of bonuses, relocation assistance, or non-educational incentives unless the employee is terminated for reasons other than misconduct or if job duties were misrepresented

- Educational sabbatical agreements

- Agreements under collective bargaining

3. Enforcement Provisions

- Employees or applicants may file complaints with the New York State Department of Labor.

- Employers may face fines of $1,000–$5,000 per violation.

- Employers attempting to enforce unlawful agreements may also be required to cover attorney fees.

What Employers Should Do Now

Even though the effective date is delayed until February 13, 2027, employers should act now to:

1. Audit Contracts – Review existing employment agreements for any stay-or-pay provisions.

2. Revise Repayment Policies – Ensure repayment clauses comply with the Act’s exceptions.

3. Train HR Teams – Make sure HR understands the new scope and enforcement rules.

4. Plan Ahead – Update contracts before the delayed effective date to avoid fines and legal disputes.

Bottom Line

New York’s amendment to the Trapped at Work Act gives employers time to adjust, but it’s not an excuse to delay. Reviewing contracts and repayment programs now ensures compliance and protects your organization from costly penalties and disputes with employees.

Ready to review your employee agreements before the new Trapped at Work Act takes effect?

Brand’s Payroll helps organizations identify risky clauses, ensure compliance, and update contracts so your policies are fair, enforceable, and aligned with New York law.

Connect with our HR and compliance experts to start the conversation.