Client Alert: Springing the TRAP: New York’s Crackdown on Training Repayment Agreements and Ban on Use of Credit History in Hiring and Compensation
Date: January 5, 2026
By:
Lisa M. Brauner
More specifically, on Friday, December 19, 2025, New York Governor Kathy Hochul signed into law two bills aimed at protecting workers: 1) New York State Assembly Bill A584 entitled the Trapped at Work Act which prohibits mandatory “Training Repayment Agreement Provisions” in employment agreements or offer letters; and 2) New York State Senate Bill S3072 which restricts employers from accessing a worker’s credit report while making decisions about hiring or compensation.
Trapped at Work Act
The Trapped at Work Act (the “Act”), which amends New York’s Labor Law, took immediate effect. The Act targets Training Repayment Agreement Provisions (TRAPs)—contracts that require employees to repay “training costs” if they leave a job before a set period. These provisions have proliferated across sectors, from healthcare and tech to transportation and retail, and increasingly draw legal scrutiny and enforcement risk.
The Act provides that no employer (whether public or private-sector) may require, as a condition of employment, any worker or prospective worker to execute an employment promissory note or similar provision requiring the worker to pay the employer or employer’s agent or assignee if the worker leaves before a specified period of time.
Interestingly, the law broadly defines “worker” to include not only employees, but also independent contractors, externs, interns, volunteers, apprentices, sole proprietors who provide services to an employer or client/customer of an employer on behalf of that employer, and an individual who provides service through a business or nonprofit entity or association.
By curbing these repayment clauses, the legislation is intended to address a chilling effect on wages and worker mobility, mitigate coercive debt practices and align New York’s labor market with broader state trends against non-compete-like restraints.
What Is Not Prohibited
The Act does not bar any agreement between a worker and an employer that: (a) requires the worker to repay sums advanced by the employer, unless such sums were used to pay for training related to the worker's employment with the employer; (b) requires the worker to pay the employer for any property it has sold or leased to such worker; (c) requires educational personnel to comply with any terms or conditions of sabbatical leaves granted by their employer; or (d) is entered into as part of a program agreed to by the employer and its workers’ collective bargaining representative.
Penalties for Violations and Commissioner Authorization
Under the Act, the NYS Commissioner of Labor can fine employers from $1,000 to $5,000 for each violation. Each worker or prospective worker whom an employer required to execute an employment promissory note or against whom an employer seeks to enforce such a note constitutes a separate violation. The Commissioner of Labor is also authorized to issue rules and regulations to execute the law.
Other States Banning Training Repayment Agreements
New York is not alone in banning training repayment agreements. California and Colorado have banned or sharply limited training repayment provisions. California’s ban on TRAP agreements and “stay-or-pay agreements” takes effect January 1, 2026. Colorado limits the use of TRAPs, treating such agreements as “consumer credit sales” and permits the Attorney General to recover treble damages on the amount of the employer's actual or attempted recovery of training costs. Multi-state employers should remain vigilant with respect to this trend towards banning or limiting TRAP agreements and confer with their legal counsel regarding any developments in states in which they employ workers.
Law Barring Use of Credit History
Governor Hochul also signed into law Senate Bill S3072, which amends New York’s general business law to prohibit the disclosure or use of a person's consumer credit history to an employer, labor organization, employment agency or agent for purposes of hiring, employment or licensing decisions. The law takes effect in 120 days from December 19, 2025. This law follows a New York City ban on use of credit history entitled the Stop Credit Discrimination in Employment Act which has been in effect since 2015.
Summary
New York employers (both public and private, and multi-state employers with New York workers) will want to review offer letters, employment agreements with training repayment provisions and stand-alone training repayment agreements to ensure compliance with the law. Employers may also want to consider other ways to boost retention—whether through compensation, career development and/or culture. Employers would also be well-advised to review their hiring and background check practices to ensure credit history is not being considered, except for the narrow permitted exceptions under the law, and train Human Resources and hiring managers on these legal developments.
If you would like legal advice regarding these issues or assistance reviewing offer letters or employment agreements or conducting managers’ training to ensure legal compliance, please reach out to your Whiteford labor and employment attorney.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.