The Advisors' Blog

In December, Liz blogged about a new California law that restricts the ability of companies to require certain repayments by employees upon separation. This WilmerHale alert explains that California isn’t a major outlier here. A few states already have similar requirements (Connecticut and Colorado, for example), and New York is now taking action.

New York’s “Trapped at Work Act” (the “Act”) was enacted on December 19, 2025, and amended on February 13, 2026 [. . .] The Act prohibits an employer from requiring, as a condition of employment, an employee or prospective employee to execute an “employment promissory note”—defined as any instrument, agreement or contract provision requiring an employee to pay the employer a sum of money if the employee’s employment relationship with that employer terminates before the passage of a stated period of time [. . .]

In addition to contracts related to residential property, sabbatical leaves and collective bargaining agreements, the amended Act expressly permits the following types of repayment agreements:

• Bonuses and relocation assistance. Agreements requiring repayment of a financial bonus, relocation assistance or other noneducational incentive upon separation from employment are permitted unless (x) the employee was terminated for any reason other than misconduct (which term is not defined but likely has the same meaning as under New York unemployment law) or (y) the duties or requirements of the job were misrepresented to the employee. Unlike its California counterpart and the tuition repayment exception below, this exception does not require a standalone agreement or have other repayment limitations.
• Certain tuition assistance. Similar to the California law, employers may recover the cost of tuition, fees and required educational materials for a “transferable credential.” To qualify, the repayment agreement must (a) be in a written contract offered separately from the employment contract; (b) not condition employment on obtaining the transferable credential; (c) specify the repayment amount (not to exceed the employer’s actual cost) in advance; (d) provide for prorated repayment proportional to the total repayment amount and the length of the required employment period with no accelerated payment schedule upon separation from employment; and (e) not require repayment to the employer if the employee is terminated, except if the employee is terminated for misconduct.

Unlike California’s law, the New York Trapped at Work Act does not provide a private right of action. Instead, the New York State Department of Labor is granted authority to bring enforcement actions. Employers found to have violated the Act may be fined between $1,000 and $5,000 per violation, with each affected employee representing a separate violation.

The alert has some suggestions for HR and legal teams:

Employers should review their existing offer letters and any employee repayment policies to ensure that any repayment obligations are compliant with applicable state law.

Personnel responsible for negotiating and drafting employment offers and contracts should be trained on these new laws.

Employers should consult with employment counsel before attempting to collect repayment from a departing employee. Deducting from final wages presents heightened legal risk, particularly in certain jurisdictions.

– Meredith Ervine