New York DOL Clarifies “Trapped at Work Act” Ahead of December Effective Date

Seyfarth Synopsis: The New York State Department of Labor (“DOL”) has issued guidance addressing several open questions under New York’s Trapped at Work Act (“Act”), which takes effect December 19, 2026. Among other clarifications, the DOL confirms that the Act applies only to new agreements or new or amended terms in existing agreements entered into on or after the effective date, and that genuinely voluntary repayment arrangements may fall outside the Act altogether. It also provides guidance concerning bonus and relocation clawbacks, performance-based advances, educational expenses, and “misconduct.”

As previously discussed here, the Trapped at Work Act generally prohibits employers from requiring employees or prospective employees, as a condition of employment, to enter into agreements requiring them to repay money to the employer if their employment ends before a stated period of time. Amendments enacted earlier this year delayed the Act’s effective date until December 19, 2026 and created express exceptions for certain common arrangements, including qualifying tuition repayment agreements, financial bonuses, relocation assistance, and other non-performance-based incentives.

The DOL has now issued guidance addressing several questions left open by the statutory text. In several respects, the guidance provides employers with additional flexibility in structuring repayment arrangements before the Act takes effect.

The key aspects of the guidance include:

• Pre-Act Agreements Are Generally Not Covered. The DOL confirms that the Act applies to new agreements, as well as new or amended terms in existing agreements, entered into on or after December 19, 2026. An existing repayment obligation therefore does not become subject to the Act simply because the retention or repayment period continues beyond December 19, even if those provisions would otherwise be prohibited by the Act.
• Voluntary Arrangements May Fall Outside the Act. According to the DOL, an arrangement is not a “condition of employment,” and therefore is not covered by the Act, where it is genuinely voluntary and separate from accepting or maintaining employment, meaning that the employee can begin or continue employment without agreeing to its terms. As an example, the DOL said that an employer may offer an employee the choice between receiving an upfront payment tied to future performance targets, subject to repayment upon the employee’s departure, or deferring the payment until the performance targets are satisfied. Because the upfront payment is optional and not a condition of employment, the repayment obligation will be permissible.
• Bonus and Relocation Clawbacks. The guidance states that sign-on bonuses, relocation assistance, and non-educational incentives, payments, or benefits not tied to specific job performance may permissibly require repayment upon the employee’s voluntary resignation or termination for misconduct. In contrast, repayment would not be permitted where the employer terminates the employee for a reason other than misconduct or where the employer misrepresented the position’s duties or requirements. The DOL also clarifies that references in the statute to an employee being “terminated” refer to an employer-initiated separation, resolving ambiguity regarding voluntary resignations. And “misconduct” means behavior detrimental to the employer’s interests or in violation of a reasonable work condition and may include conduct that an employer’s policy defines as “for cause” in a termination decision.
• Recoverable Education and Credentialing Costs. The DOL reiterates that the Act permits tuition repayment agreements for “transferable credentials” that enhance an employee’s general employability. Employer-specific or non-transferable training and mandated safety and compliance training do not qualify, while examination and licensing fees may qualify when they are part of obtaining the transferable credential. The guidance further confirms that, where an employer seeks recovery under one of the Act’s statutory exceptions, the employer must actually have paid out the amount it seeks to recover, given the statute’s use of the term “repay.”
• Other Key Clarifications. The DOL explains that the Act does not apply to arrangements that are not between an employer (or its agent or assignee) and an employee, such as certain lender-borrower loan-forgiveness arrangements conditioned on continued employment. The guidance also states that the Act does not apply to agreements expressly allowed or required under other statutes or common law, citing lawful wage advances under New York Labor Law § 193 and applicable wage-deduction regulations as an example. The DOL additionally confirms that an “employment promissory note” need not be in writing, meaning that employers should not limit their compliance review to formal standalone agreements. And a repayment obligation that is permissible under the Act does not necessarily authorize an employer to deduct that amount from the employee’s wages or final pay; employers must separately comply with applicable New York wage-payment and deduction requirements.

 Next Steps for Employers

With the Act’s December 19, 2026 effective date approaching, employers with New York employees should use the DOL’s guidance to review their existing and planned repayment arrangements. In particular, employers should:

• Inventory repayment arrangements and planned changes. Review bonus, relocation, tuition, credentialing/licensing, training, leave-advance, and other repayment arrangements, including arrangements in offer letters and policies. Identify agreements that will be entered into, renewed, amended, extended, or replaced on or after December 19. Consider whether recurring bonus grants or other new awards under existing programs may constitute new agreements or terms requiring review.
• Consider whether optionality provides greater flexibility. Evaluate whether appropriate programs can offer an upfront advance or benefit on a genuinely voluntary basis, including a deferred-payment alternative where appropriate, and ensure that optionality exists in practice.
• Review collection mechanics and multistate requirements separately. Confirm that payroll deductions, offsets, and other recovery methods comply independently with New York wage law, and account for different stay-or-pay requirements in California, Connecticut, and other jurisdictions.

The DOL’s guidance provides welcome clarity and, in several respects, confirms that employers have significant flexibility if they structure repayment arrangements carefully. At the same time, employers should evaluate both the terms and practical administration of these programs, particularly where they rely on voluntary participation, statutory exceptions, or payroll-based recovery mechanisms.

Please reach out to the authors – or your Seyfarth attorney – with any questions.