A recently enacted law banning “stay or pay” contracts has been amended, clarifying certain details and delaying the law’s effective date.
What You Need to Know:
- Trapped at Work Act paused: The law (TAWA) took immediate effect when originally approved by New York Governor Kathy Hochul on December 19, 2025, but is now suspended for at least ten months, giving employers time to review and adjust affected agreements.
- Certain definitions revised: Added terms and revised language to clarify the scope of restrictions created under the law.
- Employers’ ability to claw back certain benefits clarified: Amendments to the law provide employers with a roadmap for agreements regarding recovery of monies spent on an employee’s education, professional training, or other non-performance-based monetary incentives.
On January 21, 2026, the New York State Assembly unanimously passed an amendment to the “Trapped at Work Act” (TAWA). One week later, the New York State Senate also passed the Amendment. The Amendment is the result of an agreement that Governor Kathy Hochul struck with the state legislature to address concerns she had with the original version of TAWA.
The original version of TAWA was signed into law on December 19, 2025, with immediate effect. The Amendment was introduced by the Legislature less than three weeks later and was signed into law on Friday, February 13, 2026. We explained the original version of TAWA here and subsequently analyzed the Amendment here.
What Changed
Clarifications
The Amendment revises the original statute, starting with its definitions section. One of the most significant terms— “employment promissory note”—is clarified to provide that TAWA applies to any agreement that requires an employee to pay an employer if their employment relationship terminates before a certain date. The statute’s original language required an employee to leave employment in order for protections to apply, implying that the law might not cover workers unless they quit.
Enforceable Claw-Backs
In addition to overhauling the definitions of TAWA, the Amendment removes vague language, explicitly naming which repayment agreements ARE permissible, now that the law prohibits agreements that would allow employers to “claw back” monies expended on training and on-boarding an employee who does not remain with the employer long enough to bring a return on the investment.
First, employers are allowed to recover money spent toward a “transferable credential” (e.g., tuition and related costs) under the following specified conditions:
- a written agreement that is separate from any contract for employment;
- that the transferable credential is not a condition of employment;
- that the repayment amount is specified before the contract is executed;
- that the repayment amount does not exceed the employer’s actual cost related to the transferable credential;
- prorated repayment amounts proportional to the total repayment amount and required length of employment;
- prohibiting accelerated repayment if the employee separates from employment; and
- limiting repayment obligations only for employees who resign or are terminated for misconduct.
Second, the Amendment also allows employers to recoup incentive payments that are commonly subject to claw-back agreements, such as relocation assistance, financial bonuses, and other non-educational financial incentives that are not tied to job performance. The Amendment similarly limits repayment obligations only for employees who resign or are terminated for misconduct. Further, an employer cannot recoup these if an employee is terminated because the employer misrepresented the duties or requirements of the job to the employee.
Enforcement Provisions Revised
Additionally, the Amendment clarifies that current or prospective employees may file a complaint with the New York State Department of Labor (NYSDOL), something that was not explicitly stated in the original statute. It does not change TAWA to provide additional remedies, and employers found to have violated TAWA will still face a penalty within the range of $1,000 to $5,000, as provided in the original version of the law. The Amendment does explicate that the fine is to be based on consideration of a number of factors, including employer size, the employer’s good-faith efforts to comply with the law, the gravity of the violation, and history of previous violations.
More Time to Comply
Lastly, the Amendment provides New York employers with more time to review their agreements; according to sources at the New York State Legislature, TAWA will not be enforced until February 13, 2027—one year after the Amendment was signed.[1]
The Assembly’s notes on the Amendment state in part that the Amendment is necessary to “better align with the capacity of the [NYSDOL] to enforce the law.” As such, it is not clear that NYSDOL will take action regarding any agreements that were not compliant with TAWA from December 19, 2025, to February 13, 2026. Employers should take this additional time to ensure they are compliant with TAWA, as amended.
What New York Employers Should Do Now
- Review all existing employment agreements, offer letters, or related documents that have a claw-back provision, especially those still in effect as of February 13, 2027.
- Review relevant policies such as those addressing tuition reimbursement, relocation assistance, and non-performance-based incentive programs, and update, as necessary.
- Revise any template agreements.
- Consider revising existing agreements that conflate repayment agreements with a general employment agreement to separate them as required under TAWA.
- Ensure all new agreements are compliant with the provisions of TAWA.
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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 Ledkovsky contributed to the preparation of this Insight.
ENDNOTE
[1] The plain reading of the Amendment would put the new effective date at December 19, 2026, the anniversary of Governor Hochul’s initial approval of TAWA, which originally stated the law was effective “immediately.” The Amendment deleted the word “immediately,” replacing it with the phrase “this act shall take effect one year after it shall have become law.”
