Employers that invest in their employees – with sign-on bonuses, relocation assistance, visa or green card sponsorship, or tuition reimbursement programs – want to ensure that the favor is returned, that the employee will stay for some period of time.  Until recently, employers in New York State could achieve that through agreements that required employees to repay a portion of such advances if they left the job before a specified period of time.

New York’s “Trapped at Work Act,” which took effect December 19, 2025, changed that by prohibiting most forms of employer repayment programs.  A new state law which took effect on February 13, 2026, has put the Trapped at Work Act on hold for a year, and amends key provisions.  While ostensibly intended to redress some of the flaws in the original version, notably the discouragement of tuition reimbursement programs, perhaps by dint of poor drafting or perhaps intentionally, the new law arguably leaves employers in a worse position than the old if their concern is ensuring employees don’t take advantage of their generosity.

What the Law Prohibits

As I discussed in a prior blog post, what the law was trying to address was the problem of organizations exploiting workers by enticing them with “free” training, “free” supplies, or other benefits, and then binding them to jobs with stiff financial penalties if they left within a proscribed period before their work had “repaid” the organization’s investment.  These arrangements earned the acronym “TRAPs” (for “tuition repayment agreement provision”) and multiple government bodies on the state and federal level have been seeking to regulate them.

As originally drafted, New York’s approach applied to all “workers”, not just employees of the organization, and it prohibited an organization from entering into a promissory agreement (agreement to repay money) with a worker.  The law originally made few exceptions to that restriction, the most notable permitting repayment of sums advanced to a worker by the employer, unless those sums were used to pay for training related to the worker’s employment.

Beyond delaying the effective date to December 19, 2026, three of the most significant changes to the new version of the law are that it will:

• apply only to employees and prospective employees;
• permit advances related to training subject to a bunch of conditions for how to structure those programs; and
• very narrowly define the circumstances when an employer can seek repayment of an advance to an employee.

Advances Related to Training

The law will permit employers to seek reimbursement of funds paid by the employer toward tuition, fees, and required educational materials, if the program meets a range of requirements:

• it must be for a “transferable credential,” meaning that it provides the employee with documented evidence that the employee gained skills or completed a course that will enhance employability in the relevant industry;
• it is in a written agreement, separate from the employment contract, that outlines the repayment terms;
• employment is not conditioned on completing the course or training;
• the repayment amount does not exceed the actual amount spent;
• repayment is prorated proportional to the employment period, with no acceleration of payment upon separation from employment; and
• if the employee is terminated, repayment is only required if the termination is for misconduct.

Where the Law Misses the Mark

With respect to tuition reimbursement, the new law seems to fundamentally misunderstand how many generous employers structure their programs.  Certainly there are employers that offer a loan program where they advance funds toward a college degree or certification, and then seek to recoup that advance from the employee over time.  The new version of the law allows for those arrangements, presumably with the employee retaining a repayment obligation that potentially continues post-termination in the event of resignation or termination for misconduct.  And good luck to employers that seek to continue collecting on that.

Most employers I know, however, structure their tuition reimbursement programs differently.  The more common approach that I see is for employers to pay the cost of an academic program one course at a time, with reimbursement tied to the employee’s academic performance in the course.  For certifications or other shorter-term training, the employer might pay all or a portion of the cost upfront and full payment would be contingent on satisfactory completion.  The programs further provide that those outlays by the employer are subject to the employee remaining with the employer for some period of time, usually one to three years, with a requirement that the employee return a proportionate amount of the tuition funding if the employee leaves before the end of that defined period.  These programs are therefore providing loan forgiveness over time, not loan repayments, and they do not neatly fit within the permissible structure of the revised New York State law.

Recoupment Is Limited for Other Types of Advances

Under the new law, employers can make advances to employees for other reasons and seek repayment if the employee leaves, under certain conditions.  Employers are permitted to make advances as a financial bonus or for relocation assistance.  They can also offer other non-educational incentives, payments or benefits that are not tied to specific job performance.  This would seemingly cover payments related to visa or green card sponsorship where recoupment is otherwise legally permissible.

However, the law permits repayment only in very limited circumstances that are not entirely clear.  The law is written as a circular qualifier: repayment may not be sought unless it is for the specifically permitted categories of advances, unless the employee was terminated: (i) “for any reason other than misconduct” or (ii) because “the duties or requirements of the job were misrepresented to the employee.”  Certainly, the law permits an employer to recoup its payment if the employee is terminated for misconduct.  That appears, however, to be the only permissible reason for recoupment.

The reference to the duties or requirements of the job having been “misrepresented to the employee” would not ordinarily be a reason for an employer to terminate employment.  Misrepresentation by the employer might very well be a reason for an employee to quit their job or a defense to an employer’s assessment of poor performance, but the law does not appear to make any exception permitting recoupment based on an employee quitting or termination for poor performance. It seems likely that this was poor drafting of a rushed bill that may have been intended to permit recoupment from an employee who received payments and then quit without good reason, but it does not appear that the language of the bill actually allows for recoupment in such circumstances.

For all its flaws, the original version of the Trapped at Work Act did not condition an employer’s ability to recoup payment on the circumstances under which the employee left.  With that new limitation, the overarching concern of non-exploitative employers remains unaddressed: how can I generously support my employees, without being taken advantage of?  How do I ensure that I don’t pay for this benefit, only to have my employee resign right after the payment is received?

What Now

Employers that already modified their policies to comply with the law have the option of reverting back to their former policies for the next 10 months.  In the absence of a legal option of recoupment, employers need to spend this time evaluating their tuition reimbursement and financial benefit advancement programs to determine their preferred approach.  One option is to discontinue such programs and avoid both the financial risk of no return on the investment and the legal risk of an improperly structure program.  Other options exist but should be carefully discussed with legal counsel.

By Tracey I. Levy