With the New York Legislature’s “Trapped at Work Act” creating waves of uncertainty for employers, we turn to Sofia Khaira, a leading expert in diversity, equity, and inclusion, for clarity. The Act, signed into law in December 2025, faced immediate calls for revision, leading to a proposed chapter amendment that significantly alters its scope and delays its effective date. Sofia joins us to dissect this complex situation, exploring how businesses can navigate the shifting legal landscape. We’ll discuss the practical steps employers should take amid this legislative limbo, the strict new rules for tuition-repayment agreements, the crucial distinction between portable skills and company-specific training, and how to properly manage clawbacks for benefits like bonuses and relocation assistance, all while aiming for good-faith compliance.
Given the original Trapped at Work Act became effective in December 2025 but the proposed amendment would delay it to December 2026, what specific steps should New York employers be taking right now to manage this legislative uncertainty?
This is a classic case of legislative limbo, and the safest approach is to prepare for the strictest interpretation while hoping for the flexibility of the amendment. The most critical first step is to conduct a comprehensive audit of all existing employment agreements that contain any form of repayment obligation or promissory note. You need to identify every single contract with a “stay-or-pay” provision, whether for training, relocation, or bonuses. While the amendment offers a potential runway to December 2026, the original law is technically in effect now. Therefore, I’m advising clients to immediately pause the execution of any new repayment agreements that wouldn’t comply with the narrow exceptions proposed in the amendment. It’s far better to be cautious now than to face penalties later for agreements signed during this uncertain period.
The proposed amendment creates a narrow exception for tuition-repayment agreements. What are the most critical conditions employers must meet to structure a compliant program, and what common mistakes do you foresee employers making?
The conditions are incredibly specific and leave little room for error. First, the agreement must be truly voluntary and memorialized in a document separate from any other employment contract. Second, the credential an employee earns cannot be a condition of their employment or continued employment. Third, the repayment is capped at the employer’s actual costs. I foresee a common mistake in how the repayment obligation is structured; the law requires it to be prorated, meaning the amount owed decreases over time, and it cannot be accelerated if the employee leaves. Perhaps the most critical guardrail is that the entire obligation is voided if the employee is terminated for any reason other than proven misconduct. A best-practice example would be an employer offering to pay for a marketing manager’s digital analytics certificate from a recognized university. The agreement is a separate document, clearly states the repayment obligation will be forgiven by 1/24th each month over two years, and specifies that if the manager is part of a layoff a year later, the remaining balance is completely forgiven.
The amendment distinguishes between a “transferable credential” and employer-specific training. How can an employer concretely determine if a program meets this new standard, and what documentation should they maintain to prove it’s “widely recognized across the relevant industry”?
This distinction is all about portability. The question you have to answer is: Does this training enhance the employee’s employability with other companies in our field, or does it only benefit us? Employer-specific training, like learning a proprietary internal software system or mandated safety protocols, is explicitly excluded and its costs cannot be recouped. To prove a credential is “widely recognized,” you need to build a defensible file. This documentation could include course syllabi from the educational institution, proof of accreditation, or printouts of job postings from competitors that list this exact credential as a desired or required qualification. For something like a specialized software certification, you’d want to maintain materials from the certifying body that highlight its industry-wide application. The burden of proof is on the employer to show the investment was in the employee’s career, not just the company’s immediate needs.
Beyond tuition, the proposal allows for repayment of bonuses or relocation assistance under certain guardrails. Could you detail the key differences in how employers must handle clawbacks for these benefits versus educational costs?
The core rule for both is consistent: no repayment can be demanded if the employee is terminated for any reason other than misconduct. This is a huge shift, as it protects employees who are laid off or let go for performance reasons from suddenly being hit with a massive bill. However, there’s a crucial additional protection for employees regarding bonuses and relocation assistance: repayment is also barred if the job was misrepresented to the applicant. Imagine a scenario where a software engineer is hired with a $15,000 relocation package based on a promise of leading a new AI development team. If they arrive and are assigned to legacy system maintenance—a clear misrepresentation of the role—they can resign without any obligation to repay that assistance. This “misrepresentation” clause is unique to these non-educational benefits and places a strong onus on employers to be transparent and honest throughout the hiring process.
When assessing penalties, the commissioner of labor will consider factors like employer size and good-faith efforts. What proactive steps can a business take to demonstrate “good-faith compliance beliefs” and concretely reduce their liability?
Demonstrating “good-faith” is about showing you took the law seriously and made a genuine effort to comply, even if a mistake was made. The most important step is to engage legal counsel to review and redraft all your repayment templates to align with the new law. You must document this review process. Another key action is training your HR staff and hiring managers on what is and isn’t permissible so they don’t make verbal promises or use outdated agreements. If an unintentional violation occurs with one employee, the company can then point to its systemic efforts—the updated policies, the mandatory training sessions, the legal consultation records—as evidence that it was an isolated human error, not a willful disregard for the law. This proactive posture can make a significant difference, potentially reducing penalties by showing the gravity of the violation was low and the company’s intent was proper.
What is your forecast for New York’s Trapped at Work Act?
My forecast is that this proposed chapter amendment, or a version very similar to it, will be enacted. The governor signed the original bill on the explicit condition that these changes would be made, so there is immense political momentum to see it through. This move aligns New York with a growing national trend, much like the recent legislation in California, to curb coercive stay-or-pay provisions while still allowing for genuine, voluntary employee development programs. The new effective date of December 19, 2026, provides a critical and meaningful runway for employers to audit their practices and come into compliance. The future for New York employers is one where these agreements are not forbidden, but are subject to much stricter scrutiny and must be structured with far more care and fairness to the employee.
