New York Labor and Employment Legislation: Governor Hochul Acts on Four Bills Before Year-End

On December 19, 2025, New York Governor Kathy Hochul signed three employment-related bills into law and vetoed a fourth.

What You Need to Know:

The three new laws—two of which took immediate effect upon signature—have a wide range of implications for employers:

• “Stay or Pay” Banned: Most contracts creating debts for workers who leave employment—known as “TRAP” agreements—are now void and unenforceable in New York. Limited exceptions, including for payroll advances, remain permissible.
• Background Check Limits Expanded: With some exceptions, New York employers will be barred from using consumer credit history to evaluate job candidates.
• Disparate Impact Codified: New York State law now formally recognizes that discrimination claims can be proven based on unequal outcomes of a policy or practice.

The vetoed fourth bill would have created a blanket provision that Governor Hochul characterized as “putting a thumb on the scale” in favor of employees in legal disputes with New York employers.

The “Trapped at Work” Act

Governor Hochul signed A584C, the “Trapped at Work Act” (TAWA), which prohibits all employers—including subsidiaries and contractors—from requiring current or prospective workers to sign employment-related promissory notes as a condition of employment. The law took immediate effect on December 19, 2025, and added a new Article 37 to the New York Labor Law (NYLL). It is similar to a new California law that likewise voids agreements that tie continued employment to an employee’s receipt of training.

Often called “TRAP” agreements or “stay or pay” provisions, employment-related promissory notes are defined under Article 37 as any instrument, agreement, or contract provision that requires a worker to repay a specified amount of money if the worker decides to leave employment before a defined period of time. Banned provisions include those that require reimbursement to an employer for the cost of any training provided.

While the statute explicitly mentions agreements or provisions characterizing repayments as reimbursements for training, TAWA’s broad language could apply to many other standard employee obligations, such as relocation incentives or forgivable loans. Notably, however, the law does not prohibit or render unenforceable any agreement requiring workers to repay wage advances that were not used for employment-related training. Signing or retention bonuses, therefore, would likely remain permissible if characterized as a wage advance and not tied to training expenses.

TAWA contains other exclusions. For example, it expressly excludes agreements regarding the cost of property sold or leased to employees. The law also excludes collective bargaining agreements. Agreements requiring educational personnel to comply with the terms and conditions of sabbatical leave are also excluded.

TAWA does not just apply to employees. It also covers independent contractors, interns, volunteers, and apprentices. The New York State Department of Labor may subject employers to civil fines of $1,000 to $5,000 for each violation. While workers do not have a private right of action under the law, TAWA makes reasonable attorneys’ fees available for a successful defense against an employer’s attempt to require or enforce an unlawful agreement.

Ban on Use of Consumer Credit History in Employment Decisions

Largely mirroring New York City’s Stop Credit Discrimination in Employment Act, S3072 amends the New York General Business Law to bar employers from requesting or using consumer credit histories when making employment decisions.

Employment decisions, as defined in the law, include any decisions to hire, terminate, promote, demote, discipline, or compensate employees, or set the terms, conditions, or privileges of employment. The law takes effect on April 18, 2026, and will apply to decisions involving both external job candidates and current employees on or after that date.

Credit history checks, however, can still be performed for certain jobs, including those involving:

• access to trade secrets;
• authority over third-party funds or assets in excess of $10,000;
• fiduciary responsibilities to the employer that involve authority to enter financial agreements worth at least $10,000;
• regular duties that permit the employee to modify digital security systems protecting employer or client databases;
• high-level security clearance;
• intelligence or national security information;
• law enforcement or certain other public offices; and
• positions in which a regulatory authority or other law requires a credit check.

Lawmakers passed the law after noting that most large employers use credit checks in their hiring process, despite the lack of an explained correlation between credit history and job performance.

Disparate Impact Can Prove Unlawful Employment Practices

In response to President Trump’s executive order declaring that disparate impact theories of liability are “unconstitutional,” Governor Hochul signed A8699A, which took effect immediately. The law amends the New York State Human Rights Law (NYSHRL, a/k/a Executive Law § 296) to clarify that an unlawful employment discriminatory practice can be proven based on its disparate impact. In other words, a showing that a practice actually or predictably results in an adverse effect on a protected group, even if there is no direct proof of discriminatory intent by the employer, can suffice for a prima facie showing of unlawful discrimination.

Under the amendments, an aggrieved worker must first establish that an employment practice causes or will predictably cause a discriminatory impact. From there, an employer may be able to justify the employment practice if:

• the practice is job-related and consistent with business necessity, and
• the business necessity could not be achieved by another practice with a less discriminatory effect.

This justification for the potentially discriminatory employment practice must be supported by evidence and not be hypothetical or speculative.

Once the employer sets forth its justification for the employment practice, a worker may still be able to establish that the employment practice is unlawful if the worker can demonstrate that the business necessity could be satisfied by another practice that has a less discriminatory effect.

This new standard applies to all cases alleging employment discrimination occurring on or after December 19, 2025. Whether the amendments are intended to apply only to claims arising on or after that date (i.e., based on discriminatory actions occurring upon or after the law’s effective date) or to all cases filed on or after that date, based on claims that otherwise accrued within the NYSHRL’s statute of limitations, is unclear.

The amendments to NYSHRL essentially codify the disparate impact doctrine as established in federal statutes such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act of 1967, ensuring that practices with discriminatory outcomes can be challenged without evidence of discriminatory intent. Employers thus may still be liable at the state level for employment practices that have a disparate impact on workers of a protected category, despite the recent shift in federal policy that disavows disparate impact liability.

Remedial Construction of New York Labor Law Rejected

Among the 48 bills rejected on December 19, 2025, Governor Hochul vetoed S7388, known as the “Remedial Construction of New York Labor Law Act.” That bill would have required courts to liberally construe the NYLL. The proposed statute would have directed judges to read the NYLL broadly in favor of workers, regardless of how similarly worded provisions are construed under the Fair Labor Standards Act and other federal laws.

The bill stated that it was intended not only to strengthen worker protections but also to protect law-abiding employers by eliminating the unfair competitive advantage gained by non-law-abiding employers that violate the NYLL. In her veto memo, Governor Hochul observed that the NYLL “is carefully constructed to balance the interests of employers and employees” and scolded lawmakers for seeking to enact “a vague and sweeping statutory mandate” rather than reviewing and amending specific provisions that might be subject to misinterpretation.

What New York Employers Should Do Now

New York employers should consider whether the new laws affect their operations and take the following actions:

• Review existing employment agreements and contract templates for any promissory notes or repayment agreements that are inconsistent with TAWA and revise them as needed. Remove any provisions that create a financial obligation for an individual to an employer if the relationship ends before a date certain.
• Cease enforcement actions of preexisting promissory notes that have been rendered void and unenforceable under TAWA.
• Revisit pre-employment background check processes and update them by April 18, 2026, to ensure that consumer credit checks of applicants or employees are not requested or processed, unless the position at issue is among the exceptions listed in S3072.
• Consider conducting a privileged audit of recruitment and pay practices as well as other workforce management processes to root out unintended disparate effects that create liability.

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For additional information about the issues discussed in this Insight, please contact the attorney(s) listed on this page or the Epstein Becker Green Employment, Labor & Workforce Management attorney who regularly handles your legal matters.

Staff Attorney Elizabeth A. Ledkovsky also contributed to the preparation of this Insight.