New York recently enacted legislation affecting certain employment agreements and repayment obligations. Employers need to re-evaluate their “claw back” agreements with their employees. This article summarizes the law, its recent amendment, and practical considerations for compliance.
The Trapped at Work Act
The Trapped at Work Act (TAWA) was approved by New York Governor Kathy Hochul on December 19, 2025, and took effect immediately. Since then, the New York State Assembly and Senate have passed an amendment (the “Amendment”) which was signed into law on February 13, 2026.
TAWA prohibits agreements that require workers to repay employers for payments the employer has given them if they end their employment before a scheduled date. In some cases, the payments are given in the form of an “employer promissory note.” The Amendment clarified that TAWA applies to any agreement that requires employees to repay an employer if the employment relationship terminates before a certain date. On the flip side, the Amendment recognizes certain exceptions to this repayment obligation:
- Repayment of a signing bonus, relocation money, or similar incentive (that isn’t tied to performance) as long as the employee wasn’t fired for reasons other than misconduct and the employer didn’t misrepresent the job duties;
- Repayment for property voluntarily sold or leased to the employee from the employer;
- Repayment for voluntary tuition assistance, if it’s for education that gives the employee a credential they can use elsewhere (e.g. a degree, license, or certification) and other specific requirements are followed;
- Sabbatical agreements; and
- Repayment obligations included in a collective bargaining agreement.
Finally, the Amendment delayed TAWA’s effective date until February 13, 2027, giving New York employers more time to review their agreements and comply with the law.
Employees can file a complaint with the New York State Department of Labor (NYSDOL) for suspected violations of TAWA. Beyond investigating such claims, NYSDOL has the authority to impose civil penalties of $1,000 to $5,000 per violation.
Key Takeaways for Employers
- TAWA broadly restricts repayment obligations tied to continued employment. Agreements requiring employees to repay money given to them during the hiring process, if they leave before a specified date, are generally prohibited unless a statutory exception applies.
- The Amendment clarified the scope of the permitted exceptions. Certain arrangements may remain lawful if structured properly.
- Substance matters more than labels. Even agreements not called “promissory notes” may violate TAWA if they function as a penalty for ending employment “early.”
- Employers have a compliance window. Although TAWA is already effective, enforcement will not begin until February 13, 2027, giving employers time to review and revise agreements.
- Existing agreements should be reviewed now. Offer letters, training repayment agreements, bonus claw backs, and similar provisions should be evaluated for compliance.
- Noncompliance carries financial risk. Employees may file complaints with NYSDOL, which can impose civil penalties ranging from $1,000 to $5,000 per violation.
Conclusion
The Trapped at Work Act represents a significant change in New York employment law, and non-compliant agreements could expose employers to financial penalties. Employers should use the enforcement hiatus before February 13, 2027, to carefully review and, if necessary, revise existing agreements. Proactive steps now, including auditing repayment provisions, updating policies, and documenting exceptions, will minimize risk and demonstrate good-faith commitment to lawful employment practices.
Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or (203) 454-0560.
