New York State Governor Kathy Hochul recently signed into law the Trapped at Work Act (the Act), which, subject to limited exceptions, prohibits employers from utilizing employment promissory notes, commonly referred to as “stay or pay” contracts. The Act, which went into effect on December 19, 2025, has far-reaching implications for employers and workers across New York State.
Ban on Employment Promissory Notes
The Act prohibits employers from requiring, as a condition of employment, any worker or prospective worker to execute an employment promissory note, which is broadly 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,” including, but not limited to, training repayment agreement provisions, or TRAPs. The Act also broadly defines the term “worker” to include, among others, employees, independent contractors, externs, interns, and volunteers.
Limited Exceptions
The Act does not prohibit any agreement between a worker and employer that:
- requires the worker to repay to the employer any sums advanced to that worker by the employer, unless those sums were used to pay for training related to the worker’s employment with the employer;
- requires the worker to pay the employer for any property it has sold or leased to that worker;
- requires educational personnel to comply with any terms or conditions of sabbatical leaves granted by their employer; or
- is entered into as part of a program agreed to by the employer and its workers’ collective bargaining representative.
Enforcement Mechanisms
Employees who successfully defend against employer lawsuits to enforce voided promissory notes are entitled to recover attorney’s fees, and any employer found to have violated the Act is subject to a fine ranging from $1,000 to $5,000 for each violation. Notably, “each worker or prospective worker whom an employer required to execute an employment promissory note or against whom an employer seeks to enforce such a note” constitutes a separate violation of the Act.
Implications for Employers
Employers should review and evaluate any existing contracts or policies that might run afoul of the Act. That said, there is undoubtedly more to come on this front, as Governor Hochul noted in her Approval Memorandum that “[t]he bill as drafted was ambiguous in important respects” and that she had “reached an agreement with Legislature to address these concerns in the upcoming legislative session.”
Barclay Damon will monitor the situation and keep its clients apprised of any developments.
If you have any questions regarding the content of this alert, please contact Rob Thorpe, partner, at rthorpe@barclaydamon.com; Chloe Shortz, associate, at cshortz@barclaydamon.com; or another member of the firm’s Labor & Employment Practice Area.