On December 19, 2025, New York Governor Kathy Hochul signed into law the “Trapped at Work Act” (the “Act”) (N.Y. Lab. Law §§ 1050–55) to prohibit certain types of so-called “stay-or-pay” agreements that require an employee to repay an employer for certain expenses or compensation if the employee terminates employment within a certain period of time after their start date.  These obligations often include repayment for expenses such as training, education, quit fees, damages clauses, sign-on-bonuses, and other types of cash payments tied to a mandatory stay period.  The Act, which took effect on December 19, 2025, is similar to a new California law that took effect on January 1, 2026.

The New York Act and the new California statute follow on the heels of the National Labor Relations Board’s (“NLRB”) February 2025 recission of a 2024 NLRB General Counsel memorandum, which proposed that the NLRB adopt a framework to presume that any stay-or-pay provision is unlawful even if entered into voluntarily.  The NLRB’s recission of this memo paved the way for New York and California (and potentially other states) to regulate stay-or-pay agreements at the state level.Continue Reading New York Bans Certain “Stay-or-Pay” Agreements