New York DOL Clarifies Trapped at Work Act Ahead of December 19 Effective Date, by Solomon Abramov, Esq., 11-3-2026

The New York State Department of Labor (NYDOL) has issued guidance clarifying several open questions under New York’s Trapped at Work Act, which takes effect December 19, 2026. The guidance addresses the Act’s application to existing agreements, voluntary repayment arrangements, bonuses and relocation assistance, performance-based advances, educational expenses and the meaning of “misconduct.”

As we previously reported, the Act generally prohibits employers from requiring employees or prospective employees, as a condition of employment, to enter into agreements requiring payment to the employer if the employment relationship ends before a specified period. The law was subsequently amended to narrow its scope, revise certain exceptions and establish a December 19, 2026 effective date.

The NYDOL guidance provides employers with additional direction on how those provisions will apply as they review their agreements and policies before the law takes effect.

Existing Agreements Generally Are Not Covered
One of NYDOL’s most significant clarifications concerns existing agreements. According to the guidance, the Act applies only to new agreements, or new or amended terms in existing agreements, entered into on or after December 19, 2026.

Accordingly, an agreement entered into before the effective date does not appear to become subject to the Act merely because the repayment or retention period extends beyond December 19. Employers should be cautious, however, when modifying existing agreements on or after the effective date because new or amended terms will be subject to the Act.

Voluntary Repayment Arrangements May Be Permissible
NYDOL also clarifies that a repayment agreement that is genuinely voluntary and separate from accepting or maintaining employment is not a “condition of employment” and therefore is not prohibited by the Act.

The guidance applies this principle to several arrangements. For example, an employer may provide an upfront payment contingent on satisfying specified performance targets and require repayment if the employee also had the option to defer receiving the payment until the targets were met. Similarly, an agreement may require repayment of voluntarily accepted advanced paid leave if the employee separates before the date on which that leave otherwise would have been earned.

The Act also expressly permits repayment agreements involving voluntary purchases or leases of property from an employer, such as tools or real estate. NYDOL further clarifies that lawful wage advances permitted under New York Labor Law Section 193 and applicable regulations are not prohibited by the Act.

These examples illustrate the flexibility available to employers when structuring certain repayment arrangements. However, employers should ensure that voluntary agreements are not conditions of employment and that any repayment methods comply with applicable wage and hour laws.

Bonus and Relocation Clawbacks
The Act permits certain agreements requiring repayment of financial bonuses, relocation assistance and other non-educational incentives, payments or benefits that are not tied to specific job performance.

Under this exception, repayment may generally be required when an employee voluntarily leaves before an agreed-upon date or is terminated for misconduct, provided the job’s duties and requirements were accurately described. The exception does not permit repayment where the employer terminates the employee for a reason other than misconduct or where the duties or requirements of the job were misrepresented to the employee.

For example, the guidance explains that an employee whose position is eliminated before the applicable retention date cannot be required to repay a signing bonus under this exception.

NYDOL Clarifies Meaning of “Misconduct”
The statute permits repayment in certain circumstances when an employee is terminated for “misconduct” but does not define the term.

NYDOL states that misconduct means behavior detrimental to the employer’s interests or behavior that violates a reasonable work condition. The guidance further indicates that misconduct may include conduct identified in an employer’s policy as “for cause” for purposes of termination.

Because the reason for termination may determine whether a repayment obligation can be enforced, employers should carefully document the basis for termination when seeking repayment under one of the Act’s exceptions.

Educational Expenses and Transferable Credentials
The Act also permits certain agreements requiring employees to reimburse employers for tuition, fees and required educational materials associated with obtaining a transferable credential.

NYDOL clarifies that exam and licensing fees may qualify when they are part of obtaining the credential. Under the Act, a transferable credential must either be widely recognized by employers in the relevant industry as a qualification for employment independent of the employer’s specific business practices or provide skills or qualifications that demonstrably enhance the employee’s employability with other employers in that industry. Employer-specific training and required safety or compliance training do not qualify.

These arrangements must satisfy specific conditions. The agreement must be in writing and offered separately from any employment contract, and obtaining the credential cannot be a condition of employment. The agreement must specify the repayment amount before the employee agrees to the contract. That amount cannot exceed the employer’s actual eligible costs and must be proportionally prorated over the required employment period, without accelerating the payment schedule upon separation. The agreement also cannot require repayment following an employer-initiated termination unless the termination is for misconduct.

What Employers Should Do Before December 19
New York employers should review agreements and policies that require employees to repay money following separation, including bonus and relocation arrangements, educational reimbursement agreements, performance-based advances and paid leave advances.

Employers should pay particular attention to new agreements, and to new or amended terms in existing agreements, entered into on or after December 19, 2026. Employers considering new repayment arrangements before December 19 should consult counsel to evaluate their terms, timing and enforceability under applicable law. They should also consider whether certain optional benefits or advances can appropriately be structured as voluntary arrangements. Existing policies defining misconduct or “for cause” termination also may warrant review where repayment obligations depend on the reason for separation.

The guidance provides employers with useful clarification about the flexibility available in structuring certain repayment arrangements. However, whether an agreement complies with the Act will depend on its specific terms and the circumstances under which it is offered.

Author:
Solomon Abramov
Partner