New York State’s new “Trapped at Work Act” prohibits organizations from requiring any worker to sign a promissory note agreeing to repay the employer if the worker leaves before a certain period of time.  The new law makes exceptions for certain types of advances paid to workers, but allows no exception for funds advanced for training related to the worker’s employment.  As a result employers are disincentivized from offering tuition reimbursement policies to their employees.

California also recently passed a law prohibiting any contract that requires a worker to repay a debt or pay any penalty if the work relationship terminates.  A key difference, though, is that the California version permits tuition repayment agreements under limited circumstances.

What the Laws Are Trying to Address

New York and California are both trying to solve the same problem – organizations that exploit workers by enticing them with “free” training, “free” supplies, or other benefits, and then bind them to jobs with stiff financial penalties if they leave within a proscribed period before their work has “repaid” the organization’s investment.  These arrangements earned the acronym “TRAPs” (for “tuition repayment agreement provision”) and, as we wrote just over a year ago in a prior blog article on “Stay or Pay” provisions, the federal government under the Biden administration and various states had been looking to regulate them because of abusive practices.  New York (as of December 19, 2025) and California (as of January 1, 2026) now have new laws in place to formally address these types of agreements, but both versions of the law cut far more broadly than the abusive practice they were primarily intended to solve.

Protections Extend Beyond Traditional Employees

Both the New York and California versions of the law cover “workers,” which means not just employees on payroll but any human performing work for an organization, in any capacity.  This includes people classified as employees, independent contractors, externs, interns, apprentices, or sole proprietors.  The New York law additionally includes “volunteers,” and the California law additionally includes “prospective employees” and “freelance workers.”

The California law also specifies that it applies to people who are participating in job or skills training programs.  The New York law takes a different approach with similar effect, in that it defines the categories of contracts being regulated to include repayment agreements for training provided by the employer or a third party.  The New York law focuses on the avenue through which services are provided and states that it includes services provided both directly to an employer and services provided to an employer’s client or customer, or through a business, nonprofit entity or association.

Time-Bound vs. Indefinite Repayment Obligations

The New York law regulates agreements requiring payment if the worker leave employment before a specified time period.  The law does not define what the specified time period can be.   California’s version has no similar limitation.  Under California law, any contract requiring payment, ending forbearance from debt collection, or imposing any sort of fee or penalty if a work relationship terminates, at any point in time, is unlawful.

California ’s Carve-Out for Tuition Reimbursement

California’s new law notably permits tuition reimbursement programs – provided they meet certain requirements:

• reimbursement is being offered for a degree offered by an accredited third-party institution that is transferable and useful for other employment, and not for training that is required for the worker’s current employment;
• the tuition reimbursement agreement is separate from the offer letter/employment contract;
• employment is not conditioned on the worker obtaining the degree or credential;
• the tuition reimbursement agreement specifies the repayment amount up front, and that amount cannot exceed the tuition cost paid by the employer;
• Repayment is prorated proportionately, based on the length of required subsequent employment; and
• Repayment is only required if the worker voluntarily leaves or is terminated by the employer for gross misconduct.

New York Allows NO Tuition Exception to the Repayment Ban

The New York law allows agreements for repayment:

• of money advanced to the worker for purposes other than training related to the worker’s employment;
• of property sold or leased to the worker;
• as provided under the terms of a sabbatical for education personnel; or
• for a program under a collective bargaining agreement.

The New York law thus allows repayment for certain employer incentives, such as sign-on bonuses or visa or green card sponsorship, if they are structured as advances and otherwise meet the requirements of the New York wage laws (particularly New York Labor Law section 193 related to deductions from wages).  The New York law recognizes no exception that would permit tuition repayment.

The Trapped at Work Act’s express statement that it will not permit an exception for advances for training related to a worker’s employment threatens the continued viability of many employer tuition reimbursement programs in New York State.  For employers, given the cost of higher education, tuition reimbursement programs often represent a significant investment in employees.  The value of such programs in upskilling employees and as a retention tool is vastly diminished if employees can leave with impunity after the employer has paid for some or all of their education.  That is why employers often require one to three years of continued employment before fully forgiving tuition reimbursement that the employer paid.

Upon signing the New York law, Governor Hochul indicated she would work with the legislature to address this concern.  A recently introduced Assembly bill would delay the effective date by a year, include exceptions for certain types of tuition reimbursement programs and relocation, sign-on and other bonuses, and limit application to employees (not all workers).  However, that bill still needs to make its way through the legislative process, which means the Trapped at Work Act is fully in effect in New York for now.

By Tracey I. Levy