In this series, we will explore some of the ways states vary from one another in their employment laws.

Employers frequently enter into agreements with employees that provide them with money up front in the form of a signing bonus, tuition reimbursement, relocation expenses or other monetary benefits. Some of these agreements require the employee to repay the money in total or in part if the employee does not remain employed for a certain amount of time. For example, 50 percent of the money might have to be returned if the employee leaves in less than a year, 25 percent might have to be returned if the employee leaves in less than two years, and all repayment is forgiven if the employee stays for longer than two years. These “stay or pay” agreements benefit employers because they encourage employee retention and allow employers to recover their investment if the employee chooses to leave early. However, states with a pro-employee focus are starting to restrict such agreements.

In December 2025, New York enacted the Trapped at Work Act to restrict stay or pay provisions. The act prohibits provisions that require workers to repay money if they leave the job before a specific date. It further restricts employers’ ability to recover training expenses or to claim that workers owe their employer reimbursement of such expenses. As of Jan. 1, 2026, California has a similar law. Pursuant to the law, employers may no longer require workers to pay back money because their employment ended before a certain date.

Both laws have some exceptions, such as repayment agreements related to loans and some agreements for tuition reimbursement. However, the exceptions are narrow, and employers in New York and California should expect scrutiny on any agreement term that requires repayment of money conditioned on the length of time a worker decides to remain employed.