New York Legislation Would Snip ‘Stay or Pay’ Clauses

Quick Hits

• On June 12, 2025, the New York Legislature passed the “Trapped at Work Act” to nullify promissory notes that require employees to repay employers for certain costs if they leave their jobs within a set time period.
• The bill has not been sent to Governor Kathy Hochul yet.

If enacted, Assembly Bill A584C, known as the “Trapped at Work Act,” would generally prohibit promissory notes, which, as a condition of employment, require the repayment of the cost of training related to jobs.

“The execution of an employment promissory note as a condition of employment is unconscionable, against public policy, and unenforceable, and any such note shall be null and void,” the bill states. However, the bill permits promissory notes for sums advanced to workers for reasons other than training expenses, repayment for any property an employer has sold or leased to a worker, requirements for education professionals to comply with terms or conditions for sabbatical leaves, or terms agreed to by an employer and a union.

As the bill allows promissory notes for sums advanced to workers that are not used for training, promissory notes or other agreements to repay sign-on or similar bonuses would be permissible. A significant potential issue not addressed in the legislation is how to distinguish between training and education expenses, where the education is so closely aligned with the employment duties that it arguably could be considered training.

The bill applies to employees, independent contractors, interns, volunteers, and apprentices. If a “stay or pay” clause is rendered void, the remaining portions of the broader contract would not be affected.

The bill does not grant a private right of action, but employees could recover attorney’s fees in cases in which they were sued by an employer to enforce an unlawful agreement. The New York State Department of Labor would be permitted to level civil penalties ranging from $1,000 to $5,000 per violation.

Broader Trends

The New York bill is part of a larger trend by states, including California, Colorado, and Nevada, to limit the use of so-called “stay-or-pay” contracts, which some critics have argued limit employees’ mobility.

Next Steps

In the event the bill is enacted, employers may wish to review and update any offer letters, sign-on bonuses, training agreements, and onboarding documents that include repayment agreements. Employers will likely want to carefully evaluate reimbursement requirements for educational programs to distinguish general education from job-specific training. Employers may also need to rely on other strategies, such as offering other employee benefits and career advancement opportunities, to recruit and retain workers.

Ogletree Deakins’ New York offices will continue to monitor developments and will provide updates on the Employee Benefits and Executive Compensation and New York blogs as new information becomes available.

Joseph B. Cartafalsa is a shareholder in Ogletree Deakins’ New York office.

Carly E. Grey is a shareholder in Ogletree Deakins’ Washington, D.C., office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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