New York Enacts Chapter Amendment to “Trapped at Work Act,” Clarifying Scope, Creating Targeted Exceptions, and Delaying Effective Date

On February 13, 2026, Governor Hochul signed the chapter amendment to the Trapped at Work Act, expanding the scope of the Act while setting forth new exceptions. As we reported previously, in 2025 the legislature passed the Trapped at Work Act and the governor signed it on December 19, 2025, with an approval message calling for clarifying amendments—particularly around the permissibility of voluntary tuition assistance. The newly signed chapter amendment implements those changes.

Scope of Coverage

The amendment limits the Act’s coverage to employees, replacing the earlier, broader “worker” definition, and aligns the definitions of “employee” and “employer” with the use of these terms in labor law. It clarifies that a covered “employment promissory note” includes any instrument, agreement, or contract provision that requires an employee to pay the employer if the employee’s employment relationship with a specific employer terminates before a stated period. The core rule remains: Employers may not require, as a condition of employment, any such repayment obligation unless it falls within an applicable exception.

Effective Date

The chapter amendment revises the Act’s original effective‑date clause—replacing the prior “effective immediately” language with a new provision stating that the Act “shall take effect one year after it shall have become a law.” Because the original Trapped at Work Act was signed on December 19, 2025, the amendment retroactively alters the effective date so that the operative provisions of Article 37 will become applicable on December 19, 2026. 

This revision is significant, as the original version of the Act was already in effect as of December 19, 2025. The chapter amendment process, by agreement of the legislature and governor, makes the Act’s substantive provisions effective one year later. Although the Act was in force for a brief period, the amendment appears to postpone all operative obligations and prohibitions until December 19, 2026.

On its face, the amendment does not specify whether the revised effective date applies to agreements that were executed before December 19, 2026, nor does it include any grandfathering exemption that would shield existing repayment agreements from future scrutiny. Employers should consider the possibility that, once the Act becomes operative, agreements in effect on or after December 19, 2026 will be evaluated for compliance with the amended statute—even if they were executed earlier—and may amend or update existing templates now to reduce the risk of future unenforceability or claims of unconscionability.

Expanded Exceptions

While the chapter amendment expands the law to apply broadly to repayment agreements with employees that require continued employment, the law includes exceptions permitting agreements that 

(1) require reimbursement for “the cost of tuition, fees, and required educational materials for a transferable credential” under the statute’s five strict conditions; 

(2) require an employee to pay for “any property the employer has sold or leased to the employee”; 

(3) require 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,” subject to limits on terminations and misrepresentation; 

(4) require educational personnel to comply with sabbatical leave terms; and 

(5) are entered into as part of a collective bargaining agreement.

These exceptions are described in further detail below.

(1) Tuition‑Repayment Exception for Transferable Credentials

The chapter amendment creates a narrow, standalone exception permitting reimbursement to an employer for the cost of certain educational expenses—provided strict conditions are satisfied and the credential is “transferable.” The statute defines a “transferable credential” as a degree, diploma, license, certificate, or documented skill completion widely recognized by employers in the relevant industry as a qualification for employment, and expressly excludes employer‑specific/non‑transferable training and mandated safety or compliance training.

These requirements specify that a compliant agreement must:

i. “be set forth in a written contract that is offered separately from any contract for employment”

By requiring a standalone agreement, the statute seeks to confirm that the employee has a separate, voluntary opportunity to review and agree to the repayment terms without the pressure associated with accepting an employment offer.

ii. “not require the employee to obtain the transferable credential as a condition of employment”

This provision appears to be an attempt to ensure that such repayment agreements are voluntary and discretionary to the employee (and not imposed on the employee in connection with their employment).

iii. “specify the repayment amount before the employee agrees to the contract, and the repayment amount must not exceed the cost to the employer of the tuition, fees, and required educational materials for the transferable credential”

This requirement prohibits employers from charging interest or fees, and requires that amounts be disclosed up front, without room for estimates, contingencies, or ranges. This may limit the ability to cover educational expenses and costs in a flexible manner, and increase paperwork burdens on employers seeking to comply with this new requirement.

iv. “provide for a prorated repayment amount during any required employment period and may not require an accelerated payment schedule if the employee separates from employment”

This requirement will both prohibit repayment obligations that require repayment in full if employment ends and requires that the amount be prorated during any required employment period. 

v. “not require repayment if the employee is terminated, except if the employee is terminated for misconduct”

This requirement prohibits repayment unless the employee engages in misconduct. The statute does not expressly state that it permits repayment on voluntary separation, but the language limiting repayment to termination for misconduct can reasonably be read to permit repayment after voluntary separation. Reductions in force, restructuring, performance‑based terminations, or even “no‑fault” separations may not constitute misconduct.

(2) Non‑Educational Incentives and Payments

The amendment also authorizes repayment provisions related to financial bonuses, relocation assistance, or other non‑educational incentives or payments that are not tied to specific job performance. However, repayment can only be required if the employee voluntarily separates, but not where the employee was terminated for any reason other than misconduct, or if the duties or job requirements were misrepresented to the employee. Similarly to above, the statute does not expressly state that it permits repayment on voluntary separation, but the language regarding termination for misconduct can reasonably be read to permit repayment after voluntary separation. Agreements requiring such repayment must therefore be carefully drafted to ensure that repayment is triggered only by voluntary resignation or termination for misconduct.

(3) Property Sold or Leased to Employees

The statute retains the exception for agreements requiring an employee to pay for property sold or leased to them by the employer, provided the transaction was voluntary. This includes equipment, tools, technology, or other employer‑owned materials transferred for the employee’s personal or professional use. 

(4) Sabbatical‑Leave Terms for Educational Personnel

The amendment preserves the existing provisions permitting agreements that require educational personnel to comply with the terms of sabbatical leave programs. These terms may include return‑to‑service obligations or repayment requirements consistent with traditional academic employment structures.

(5) Collective Bargaining Agreements

The Act continues to recognize agreements entered into as part of a collective bargaining agreement. Union‑represented employees may therefore be subject to repayment provisions negotiated at the bargaining table, provided they comply with the statute’s requirements.

Enforcement and Penalties

There remains no standalone private right of action under the statute. Employees or applicants may file complaints with the State Department of Labor. Civil penalties range from $1,000 to $5,000 per violation, and each affected employee or applicant constitutes a separate violation. In assessing penalties, the NY labor commissioner must consider the size of the employer’s business, the employer’s good‑faith belief in its compliance, the gravity of the violation, and the employer’s history of prior violations.

The Department of Labor “may promulgate rules and regulations” to implement Article 37 but is not compelled to do so. As of this writing, no regulations or guidance specific to this law have been published.

Practical Next Steps

Employers should move quickly to inventory all agreements that contain any repayment obligations, ensure tuition‑related arrangements are optional and separately documented, cap repayment at actual employer cost, provide straight‑line proration with no acceleration, and ensure non‑educational repayment obligations are triggered only by voluntary resignation or termination for misconduct. Additionally, employers can consult with employment counsel to structure agreements that comply with these new requirements, as well as complying with New York’s other requirements and limitations relating to repayment by employees to employers.