New York Prohibits Employment Promissory Notes

By the end of the year 2025, Senate Bill S4070B was signed into law, enacting “Trapped at Work Act” (“the Act”). The Act took effect immediately upon being signed by Governor Hochul on December 19, 2025.

For guidance on complying with New York’s new restrictions on employment promissory notes, including reviewing offer letters, training agreements, and retention structures, please contact the ILS legal team at contact@consultils.com. We assist employers with practical compliance reviews, risk assessment, and policy adjustments to help ensure alignment with evolving labor laws.

Key Provisions

The Act bans employers from requiring workers—or prospective workers, including independent contractors, interns, volunteers, and apprentices—to sign employment promissory notes as a condition of work. These provisions are now deemed unconscionable, against public policy, and unenforceable.

An “employment promissory note” is defined broadly: any agreement that forces a worker to pay money if they leave before a set period, even if the payment is labeled as “training reimbursement.”

The prohibition does NOT apply to agreements that:

• Require repayment of sums advanced by the employer unless they were used to pay for job-related training (i.e., basic advances remain enforceable).

• Require repayment for property sold or leased to the worker.

• Are terms of sabbatical leave agreements for educational personnel.

• Are part of collective bargaining agreements with union representatives.

  
  

Enforcement & Penalties

Employers violating the statute may be fined $1,000 to $5,000 per violation, with each affected worker or prospective worker treated as a separate violation.

A worker who is sued by an employer to enforce a prohibited note and successfully defends can recover attorney's fees. Nevertheless, the law does not provide a separate private right of action for employees beyond these mechanisms.

The Bigger Picture

New York’s law mirrors a broader shift toward employee mobility, echoing California’s recent AB 692, which targets “repayment” and “stay-on” clauses that financially trap workers.

What This Means for Employers

Now is the time to review offer letters, onboarding documents, and training agreements to ensure compliance with the Act. While legitimate retention bonuses and wage advances remain lawful, exit penalties tied to training or tenure are increasingly off-limits, and, could subject employers to penalties.

Employer Response Strategies

• Review Employment Agreements: Quickly review offer letters, training agreements, and onboarding documents for any repayment or early-exit clauses that may violate the new law.

• Remove Training-Related Repayment Clauses: Eliminate provisions that require employees to repay training costs if they leave before a set period, regardless of how the clause is labeled.

• Confirm Lawful Retention Tools: Ensure retention bonuses, wage advances, or incentives are structured as rewards—not penalties tied to continued employment.

• Align HR and Hiring Practices: Train HR teams and hiring managers to avoid discussing or implying repayment obligations during recruitment or onboarding.

• Update Internal Policies: Document compliant compensation, training, and retention policies and apply them consistently across the organization.

• Plan for Multi-State Compliance: Employers operating in multiple states should monitor similar developments and consider adopting uniform, forward-looking policies.

For guidance on complying with New York’s new restrictions on employment promissory notes, including reviewing offer letters, training agreements, and retention structures, please contact the ILS legal team at contact@consultils.com. We assist employers with practical compliance reviews, risk assessment, and policy adjustments to help ensure alignment with evolving labor laws.

Disclaimer：This article is based on the latest policy information as of December 15 2025. Given the rapid changes in immigration policies, it is advisable for enterprises to pay close attention to official updates and consult professional immigration lawyers for the latest guidance. Our firm will continue to track policy developments and provide clients with timely and accurate professional services.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949

Siyun specializes in consumer protection and product liability, with a strong record in defeating dispositive motions, managing complex discovery, and conducting depositions in state and federal courts. She represents consumers in high-stakes product liability and warranty cases against major automakers, bringing deep experience with warranty laws, the UCC, the CLRA, and fraud statutes.

She oversees all phases of litigation—from case strategy to trial preparation—executing discovery plans, handling motion practice, and managing negotiations and depositions. Siyun’s detail-oriented, strategic approach delivers strong advocacy and practical results for clients navigating consumer disputes.

Email:  contact@consultils.com | Phone: 626-344-8949