If your offer letters include a sign-on bonus that must be repaid on early departure, recoverable relocation costs, or a training reimbursement clause, those provisions need review before 19 December 2026.
Most employers who front a cost for a new hire want some protection if that person leaves in six months. Sign-on bonuses, relocation, training, certifications, equipment. The standard answer has been a repayment clause, and across a growing number of states that answer is getting narrower.
New York has just drawn the sharpest line, with a deadline in December. The reasoning behind it is spreading, so the underlying question is worth answering properly wherever you employ people: when someone leaves early, what can you actually recover?
What New York's Trapped at Work Act Bans
New York's Trapped at Work Act prohibits conditioning employment on an "employment promissory note." The definition is deliberately broad: any agreement requiring a worker to pay money to the employer, or to the employer's agent or assignee, if the employment relationship ends before a stated period.
It expressly reaches provisions framed as reimbursement for training, whether the training came from you or from a third party. An agreement that qualifies is void and unenforceable.
Get the Date Right
This has already moved once, and the write-ups disagree. The Act was originally effective 19 December 2025. A chapter amendment signed on 13 February 2026 revised it and shifted the operative date to 19 December 2026, applying to agreements executed on or after that date.
Treat 19 December 2026 as the compliance date, and confirm it before relying on any summary. A provision that has been amended once can be amended again.
Where These Clauses Hide
Most employers do not think of themselves as using stay-or-pay agreements. They use some version of the following:
A sign-on bonus repayable if the employee leaves within twelve months. Relocation assistance recoverable on early departure. Reimbursement of training or certification costs. Tuition assistance carrying a service commitment. Equipment or licensing costs recovered on exit. A draw or commission advance tied to tenure.
Each of those can meet the statutory definition. The label on the clause does not matter; the trigger does.
The Test Is Simple
Does the worker owe you money because they left before a particular date? If so, the provision is within scope and needs to clear an exception.
The Narrow Exception
The amendment added a path for genuine educational investment. A provision may require repayment of the cost of tuition, fees and required educational materials for a transferable credential, but only where the arrangement satisfies every statutory condition.
"Transferable" carries the weight. A credential the worker can take to another employer is treated differently from training specific to your systems. Internal onboarding is not a transferable credential, however much it cost you.
Two Situations Where Repayment Is Barred Regardless
Even where a provision otherwise fits the exception, repayment cannot be required where the employer terminated the worker for any reason other than misconduct, or where the job's duties or requirements were misrepresented to the worker.
The first of those matters most in practice. A repayment clause that triggers on any separation, a layoff included, will not hold. If your template says "upon termination for any reason," it needs rewriting.
Penalties, and One Piece of Good News
Civil penalties run from $1,000 to $5,000 per violation. Per violation, not per policy, which makes a standard clause in a widely used template an expensive thing to leave in place.
The good news is that an invalid stay-or-pay provision does not take the rest of the agreement down with it. The offer letter survives. The clause does not.
What To Do in the Next Six Weeks
Pull every template that could contain one. Offer letters, onboarding packets, training acknowledgments, bonus agreements, relocation letters, commission plans, and anything your recruiters send that was not drafted by a lawyer.
Flag every clause that requires repayment on departure, whatever it is called.
For each one, decide: delete or rebuild. Rebuilding only makes sense where there is a genuine transferable credential and you are prepared to meet each statutory condition.
Check your termination triggers. Anything broader than misconduct is a problem.
Reissue the templates before 19 December, and brief whoever sends offers so the old version does not survive in someone's desktop folder.
Agreements already executed sit in a different position from those signed on or after the compliance date. That is worth specific advice rather than an assumption in either direction.
Reviewing Your Offer Letters
A template review against this Act is a short, defined project, and the deadline is close. Start with a consultation.
Schedule a Consultation →The Same Question Elsewhere
New York is early, not alone. Washington's incoming noncompete legislation reaches training repayment obligations, clawbacks and forfeiture provisions on the same theory: an agreement that makes leaving expensive functions as a restraint on moving, whatever it is called. That ban takes effect in June 2027.
If you use repayment clauses across several states, the durable approach is to assume the narrowest rule applies and design to it. Tie repayment to a genuine, transferable credential; cap it at actual documented cost; prorate it over the service period rather than making it a cliff; and trigger it only on a voluntary resignation, never on a termination you initiated.
A clause built that way survives in most places. A flat "repay in full if you leave within a year" clause is increasingly unenforceable in all of them, and unenforceable clauses do not retain anyone — they just create a dispute at exit.
The Bottom Line
This is the nearest deadline of the three restrictive-covenant changes facing employers in New York and Washington, and it is the one with the cheapest fix. Pulling a clause out of a template costs an afternoon. Leaving it in costs $1,000 to $5,000 each time it is used.
If you also employ people in Washington, the statewide noncompete ban taking effect in June 2027 covers overlapping ground and carries a notice obligation that needs a much longer run-up.