Just ahead of the Trapped at Work Act’s effective date, the New York State Department of Labor (NYSDOL) released guidance clarifying several key issues the statute had previously left unresolved.
As a quick reminder and as we explain in more detail here, the Trapped at Work Act (TAWA) prohibits employers from requiring employees to sign an agreement that obligates an employee to repay the employer for specific benefits if their employment relationship terminates before a certain date absent certain conditions. TAWA also exempts certain agreements from coverage, such as financial bonuses, relocation assistance, or other non-educational assistance not tied to specific job performance, unless the employee resigned or was terminated for “misconduct.”
First and foremost, in order to resolve some ambiguity, the guidance clarifies the effective date of the law: December 19, 2026. (The guidance also explains that the law only applies to new agreements, or amended terms in existing agreements, entered into after the law’s effective date.
Notably, the NYSDOL’s guidance clarifies that employers can require employees to repay financial bonuses or payments that are contingent on meeting specific performance targets, as long as the employee has the option to defer the payment until after meeting the performance targets. According to the NYSDOL, this approach is permissible because the arrangement is voluntary and no longer a condition of employment. This deferral approach resembles the requirements under California’s similar (and recently amended) “stay or pay” law.
In addition, while “misconduct” had previously been undefined, NYSDOL’s guidance explained that “misconduct” means any “behavior that is detrimental to the employer’s interest or in violation of some reasonable work condition, including what an employer’s policy may define as ‘for cause’ in a termination decision.” This means that employers may no longer need to fit their pre-existing cause definition into a less defined understanding of misconduct.
Lastly, the guidance explains that the use of “terminate” in the law means when the employer initiated the end of the employment relationship and confirms that exam and licensing fees can be included in repayment agreements if they are part of obtaining the transferable credential.
What New York Employers Should Do Now
- Review employment agreements, offer letters, or related documents entered into or amended after the effective date that have a claw-back provision for compliance with TAWA.
- Review relevant policies such as those addressing tuition reimbursement, relocation assistance, and incentive programs, and update as needed.
- Monitor the NYSDOL for future guidance.
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The Workforce Bulletin blog is currently edited by Scott J. Connolly, Adam S. Forman, Greta Ravitsky, Elizabeth S. Torkelsen, and Jennifer Stefanick Barna.
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