Stay or Pay? The Evolving Legality of Employer Repayment Provisions
By Jill Kahn Marshall, Anna Beckelman, Lucia Mead
“Stay-or-pay” provisions are requirements in employment contracts that an employee, upon their departure from an employer before a defined period of time, repay the employer for expenses related to their employment.[1] Such mandated repayments may be for training costs (often known as training repayment agreement provisions, or TRAPs) or visa-related fees.[2] While TRAPs have been used since the 1990s for highly skilled and higher paying positions, by 2023, the Consumer Financial Protection Bureau (CFPB) noted they had become increasingly common in low wage and moderate wage industries.[3] According to the CFPB, the growing prevalence of stay-or-pay provisions arose from the increased regulation and scrutiny of non-compete agreements, with employers seeking an alternative way to discourage employees from leaving the company.[4]
In recent years, the legality of stay-or-pay provisions has been called into question. In October 2024, the General Counsel for the National Labor Relations Board (NLRB) issued a memorandum stating that many such contract provisions were unlawful under the National Labor Relations Act (NLRA).[5] The NLRB stated these repayment requirements impede job mobility by “erecting a financial barrier to quitting,”[6] and discourage employees from engaging in protected activity to improve their working conditions, as they may fear such activity could lead to termination and trigger payment obligations to their employer.[7] In January 2025, the American Civil Liberties Union also described stay-or-pay provisions as unlawful under the NLRA and other state and federal laws,[8] and further stated that they were “substantively and procedurally unfair [and] used to coerce labor” while disproportionately affecting women and workers of color.[9] An inquiry by the CFPB has also raised concerns that workers may not be fully aware they are agreeing to take on employer-driven debt, or that employers may misrepresent the nature and value of such debt.[10]
Although the federal government during the Biden administration expressed concern regarding stay-or-pay provisions, the Trump administration has distanced itself from the issue. The NLRB’s General Counsel under President Trump rescinded numerous Biden-era General Counsel memoranda, including the prior GC’s memorandum on non-compete agreements and stay-or-pay provisions.[11] Instead, these provisions are now being addressed at the state level. In October 2025, California enacted AB 692, which prohibits employers from, among other things, requiring an employee to repay training and education-related costs upon departure,[12] and from imposing penalties, costs or fees such as replacement or retraining fees, reimbursement for immigration and visa-related costs, or quit fees.[13] The California law exempts contracts related to the repayment of the cost of tuition, as long as the agreement is separate from the employment contract and certain other conditions are met.[14] The stay-or-pay ban in California also contains exceptions related to the repayment of retention bonuses, contracts related to enrollment in an apprentice program, contracts related to residential property, and contracts entered under a loan repayment assistance program or loan forgiveness program provided by a government agency.[15]
In December 2025, New York enacted the Trapped at Work Act,[16] with an amended version signed into law in February 2026.[17] The amended Trapped at Work Act prohibits employers from the use of “employment promissory notes,” defined as a contract provision “that requires an employee to pay the employer, or the employer’s agent or assignee, a sum of money if the employee’s employment relationship with a specific employer terminates before the passage of a stated period of time.”[18] The law explicitly states that such banned “employment promissory notes” would include those which require a departing employee to reimburse the employer, or the employer’s assignee or agent, for non-transferable or employer-specific training provided to the employee.[19] The Trapped at Work Act does not proscribe the repayment of sums advanced to an employee that are unrelated to training, contracts requiring repayment for property the employer has leased or sold to the employee, contracts entered into by a worker’s collective bargaining representative, or contracts requiring compliance with the terms and conditions of sabbatical leave for education employees.[20] The law also permits tuition repayment agreements, provided that the credentials obtained are not mandated by the employer and certain other conditions are met.[21] The Trapped at Work Act goes into effect February 13, 2027.
Other states are also considering restrictions on stay-or-pay provisions. The Minnesota legislature has introduced a proposed ban,[22] while in Ohio, a bill that addresses post-employment restrictions includes a section which would restrict stay-or-pay provisions.[23] Pennsylvania has also proposed legislation banning TRAPs and prohibiting employers from requiring these agreements as a condition of hiring or continued employment.[24] The New Jersey General Assembly has also introduced a bill that would expressly ban TRAPs, and render any such agreements null and void if enacted. [25]
In the absence of sustained federal regulation or consistent enforcement, states are increasingly stepping in to shape the rules around employee mobility. By imposing clearer limits and defined exceptions, states are seeking to distinguish legitimate cost recovery mechanisms from arrangements that function as de facto restraints on departure. For employees, these developments may offer enhanced protection against repayment terms that operate as penalties for leaving a job. For employers, they underscore the importance of carefully evaluating such policies in light of evolving statutory requirements. As additional jurisdictions weigh reform, the regulation of employment-related repayment provisions will likely remain a dynamic area that should be closely monitored.
[1] “Consumer risks posed by employer-driven debt.” January 20, 2023. Issue Spotlight: Consumer risks posed by employer-driven debt | Consumer Financial Protection Bureau
[2] Id.
[3] Id.
[4] Id.
[5] Jennifer Abruzzo, “Remedying the Harmful Effects of Non-Compete and ‘Stay-or-Pay’ Provisions that Violate the National Labor Relations Act,” at 5. October 7, 2024. gc-25-01-remedying-the-harmful-effects-of-non-compete-and-a-œstay-or-paya-_-provisions-that-violate-the-national-labor-relations-act-(1).pdf
[6] Id. at 7.
[7] Id.
[8] “Civil Rights Group Urge the American Arbitration Association to Stop Enforcement of Arbitration Agreements,” at 2. January 13, 2025. Civil Right Groups Urge the American Arbitration Association to Stop Enforcement of Arbitration Agreements | American Civil Liberties Union
[9] Id. at 2-3.
[10] “Consumer risks posed by employer-driven debt.” January 20, 2023. Issue Spotlight: Consumer risks posed by employer-driven debt | Consumer Financial Protection Bureau
[11] “GC 25-05 Rescission of Certain General Counsel Memoranda.” February 14, 2025. GC 25-05 Rescission of Certain General Counsel Memoranda | National Labor Relations Board
[12] “AB 692 Employment: contracts in restraint of trade.” Bill Text – AB-692 Employment: contracts in restraint of trade.
[13] Id.
[14] Id.
[15] Id.
[16] “A00584 Summary.” Bill Search and Legislative Information | New York State Assembly
[17] “A9452 Summary.” Bill Search and Legislative Information | New York State Assembly
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] “SF 2533.” SF 2533 Introduction – 94th Legislature (2025 – 2026)
[23] “S.B. 11.” search-prod.lis.state.oh.us/api/v2/general_assembly_136/legislation/sb11/00_IN/pdf/
[24] “House Bill 421.” https://www.palegis.us/legislation/bills/2025/hb421
[25] “New Jersey S2105.” https://trackbill.com/bill/new-jersey-senate-bill-2105-prohibiting-training-repayment-agreements/2783099/
This article is intended as a general discussion of these issues only and is not to be considered legal advice or relied upon. For more information, please contact RPJ Partner Jill Kahn Marshall, who counsels individuals and corporations in the areas of employment law, litigation and dispute resolution, and healthcare. Ms. Marshall is admitted to practice law in New York and Massachusetts, as well as the District Courts for Massachusetts and the Southern and Eastern Districts of New York.