As amended, the TWA retains its core prohibition but incorporates a revised scope and new exclusions aimed at addressing Governor Hochul's concerns.
On February 13, 2026, Governor Kathy Hochul signed into law amendments to the New York Trapped at Work Act (TWA), set forth in Assembly Bill A9452.
As discussed in our recent year-end Alert, the TWA was enacted by Governor Hochul on December 19, 2025, making New York the second state after California to ban “stay or pay” employment promissory notes subject to specific statutory exclusions. While the amendments follow closely on the heels of the TWA’s recent enactment, they are not unexpected. In her approval memorandum accompanying the TWA’s original signing, Governor Hochul acknowledged that the TWA contained ambiguities and inadvertently prohibited voluntary tuition assistance programs—and announced an agreement with the New York Legislature to address these issues in the upcoming session.
As amended, the TWA retains its core prohibition but incorporates a revised scope and new exclusions aimed at addressing the above concerns. The amendments also delay the effective date to December 19, 2026, one year later than the original effective date of December 19, 2025, providing employers with additional time to prepare for compliance. This Alert summarizes the key changes introduced by the amendments and offers guidance for employers navigating the TWA’s revised requirements.
Scope of Coverage
The TWA’s core prohibition remains intact, albeit with a more limited reach in terms of application. It provides:
No employer may require, as a condition of employment, any employee or prospective employee to execute an employment promissory note. 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.[1]
This provision reflects three very important amendments to the scope of the TWA by way of new definitions.
First, the amendments redefine the TWA’s class of protected individuals. As amended, the TWA’s protections are limited to “employees,” defined as “any person employed for hire by an employer in any employment.” This is a significant shift away from the initial TWA’s protections, which had applied to “workers”—a term broadly defined to include employees, independent contractors, interns, volunteers and apprentices, as well as other individuals.
Second, the definition of “employer” has likewise been narrowed to cover only those persons, corporations, limited liability companies or associations that employ individuals. This change is consistent with the amended TWA’s reduced scope of protected individuals, as it eliminates the prior definition’s inclusion of persons and entities that contract workers, and subsidiaries and entities of employers that provide training to workers.
Finally, the amendments refine the definition of an “employment promissory note” subject to the TWA’s restrictions. Under the amended TWA, an “employment promissory note” is defined as:
[A]ny instrument, agreement, or contract provision that requires an employee to pay the employer, or the employer’s agent or assignee, a sum of money if the employee’s employment relationship with a specific employer terminates before the passage of a stated period of time.
This new definition removes the former’s inclusion of instruments, agreements or contract provisions classifying payment as reimbursement for training, which accommodates the addition of the new exclusion for “tuition repayment agreements” discussed below.
New Exclusion: Tuition Repayment Agreements
Under the amended TWA, employers and employees may enter into tuition repayment agreements requiring reimbursement for tuition, fees, and educational materials for “transferrable credentials,” provided that five conditions are satisfied.
The first question is whether there is a “transferrable credential,” which is defined as:
[A]ny degree, diploma, license, certificate, or documented evidence of skill proficiency or course completion that is widely recognized by employers in the relevant industry as a qualification for employment, independent of the employer’s specific business practices, or that provides skills or qualifications that demonstrably enhance the employee’s employability with other employers in the relevant industry.
Excluded from this definition are (a) instructions on internal policies and/or proprietary processes, systems, software and equipment unique to the employer, (b) instructions that comprise skillful variations of general processes known to the relevant trade or industry, and (c) any training required by federal, state or local law to maintain workplace safety, including but not limited to OSHA certifications, sexual harassment prevention or diversity training.
If the repayment obligation relates to a transferrable credential, then the following five requirements must be met:
- The agreement must be set forth in a written contract that is offered separately from any contract for employment;
- The agreement cannot require the employee to obtain the transferable credential as a condition of employment;
- The agreement must specify the repayment amount before the employee agrees to the contract, and that repayment amount cannot exceed the employer’s cost of the tuition, fees and required educational materials for the transferable credential received by the employee;
- The agreement must specify a prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period, and cannot require an accelerated payment schedule if the employee separates from the employment; and
- The agreement cannot require repayment if the employee is terminated, unless the termination is for misconduct, a term notably left undefined by the amendments.
The amendment is silent on the right of employers to require repayment upon voluntary resignation. Because the limitation on repayment upon termination is limited to terminations other than for misconduct, the exclusion reasonably may be read to allow for repayment upon voluntary resignations.
New Exclusion: Incentive Arrangements
The amendments also introduce a new exclusion to permit incentive arrangements. Specifically, the amended TWA expressly allows agreements that require employee repayment of a financial bonus, relocation assistance or other noneducational incentive or other payment or benefit that is not tied to specific job performance “unless the employee was terminated for any reason other than misconduct or the duties or requirements of the job were misrepresented to the employee.”
Because the limitation on repayment upon terminations is limited to terminations other than for misconduct, this exclusion also reasonably may be read to allow for repayment upon voluntary resignation.
However, in all cases, the amendments provide there is no right of reimbursement if the employer misrepresented to the employee the duties or requirements of the job.
Other Exclusions and Enforcement
The amended TWA retains three exclusions to the prohibition, with only slight modifications, permitting agreements for (1) voluntarily purchased or leased employer property, (2) educational personnel sabbatical leave obligations and (3) programs agreed to by the employer and its employees’ collective bargaining representative.
The TWA does not provide a private right of action, but prompts employees or prospective employees to file a complaint with the commissioner. Employers may face fines of $1,000 to $5,000 per violation, with each affected employee constituting a separate violation. The commissioner is required to give “due consideration” to the size of the employer’s business, good faith, the gravity of the violation and the history of prior violations in assessing penalties. Additionally, employees who successfully defend against enforcement of an employment promissory note may recover attorney’s fees.
What This Means for Employers
Employers should use the delayed effective date to review all active agreements containing repayment obligations—including sign-on clawbacks, relocation assistance agreements, tuition reimbursement arrangements and training repayment agreements—and revise them as needed.
Though clearly applied prospectively, the TWA’s statutory text leaves open a question as to whether its prohibitions also apply retroactively. The TWA empowers the commissioner to issue rules and regulations on the TWA, which we anticipate will offer clarity on this open question as well as its application generally. We will continue to monitor developments regarding this legislation and will provide further updates as warranted.
For More Information
If you have any questions about this Alert, please contact Eve I. Klein, Jonathan A. Segal, Katelynn Gray, Gregory Slotnick, Paige Carey, Jessica Goldstein, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Notes
[1] The TWA also continues to provide that “[i]f any such note is part of a larger agreement, the invalidity of such note shall not affect the other provisions of such agreement.”
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.