By: Jamie Davila, Esq. and Ty Hyderally, Esq.

Date: January 16, 2026

New York Governor, Kathy Hochul signed three employment related bills on December 19, 2025, which went into effect immediately upon the signing.

1. “Stay or Pay” Banned

Commonly known as “TRAP” agreements or “stay or pay” provisions, employment-related promissory notes, as defined under New York Labor Law Article 37, as any instrument, agreement, or contract provision that requires a worker to repay a specified amount of money if the worker decides to leave employment before a defined period of time. Governor Hochul signed A584C, the “Trapped at Work Act” (TAWA) on December 19, 2025. TAWA prohibits all employers, including subsidiaries and contractors, from requiring current or prospective employees to sign employment related promissory notes as a condition of employment. The law took effect on December 19, 2025, and added a new Article 37 to the New York Labor Law.[1]

The statute specifically mentions agreements or provisions characterizing repayments as reimbursements for training, TAWA’s broad language can also be applied to other employee obligations such as relocation incentives or forgivable loans. TAWA does not prohibit or render any agreements unenforceable requiring workers to repay wage advances that were not used for employment related training. TAWA also applies to independent contractors, interns, volunteers, and apprentices.[2] TAWA excludes agreements regarding the cost of property sold or leased to employees as well as agreements requiring educational personnel to comply with the terms and conditions of sabbatical leave and collective bargaining agreements.

2. Background Check Limits Expanded

S3072 amends the New York General Business Law to bar employers from requesting or using consumer credit histories to make employment decisions. The law goes into effect on April 18, 2026, and will apply to decisions involving both external job candidates and current employees on or after that date. Credit history checks can still be performed for jobs involving: access to trade secrets; authority over third-party funds or assets in excess of $10,000; fiduciary responsibilities to the employer that involve authority to enter financial agreements worth at least $10,000; regular duties that permit the employee to modify digital security systems protecting employer or client databases; high-level security clearance; intelligence or national security information; law enforcement or certain other public offices, and positions in which regulatory authority or other law requires a credit check.

3. Disparate Impact Codified

Executive Order, Restoring Equality of Opportunity and Meritocracy, signed by President Trump, on April 23, 2025, has the primary goal of eliminating Diversity Equity and Inclusion policies and practices[3]. The Order has the specific focus of dismantling legal claims for discrimination based on a disparate impact theory of liability. In response to this Executive Order, Governor Hochul signed A8699A, which immediately went into effect on December 19, 2025.

Despite this, the proposal by the Governor amends the New York State Human Rights Law to specify that unlawful employment discrimination can be proven based on disparate impact. What this means is that a showing that an action actually or predictably results in an adverse effect on a protected group, even if there is no direct proof of discriminatory intent by the employer is enough for a prima facie showing of unlawful discrimination.[4] Impact without intent is still a violation of the law.  As a result, if an aggrieved worker can establish that an employment practice causes or will predictably cause a discriminatory impact, that employee would be successful in pursuing a violation of the law. An employer can justify the employment practice if: 1) the practice is job-related and consistent with business necessity and 2) the business necessity could not be achieved by another practice with a less discriminatory effect. The justification for the discriminatory employment practice must be supported by actual evidence and cannot be hypothetical or speculative.[5]

This new standard applies to all cases alleging employment discrimination occurring on or after December 19, 2025. However, it remains unclear whether the new standard applies to claims arising before December 19, 2025, or whether the change applies to cases filed before December 19, 2025, that are pursuing a disparate impact violation as a violation of the New York State Human Rights Law. Thus, the law establishes that employers may still be liable at the state level for employment practices that have a disparate impact on workers of a protected category.

If you feel that you are the target of discrimination, harassment, whistleblower retaliation, or some other issue in the workplace, or if you have any questions regarding your rights as an employee, you should seek out an experienced attorney who concentrates in employment law. Our firm has been concentrating in employment law for over twenty-three (23) years!

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This blog is for informational purposes only. It does not constitute legal advice and may not reasonably be relied upon as such. If you face a legal issue, you should consult a qualified attorney for independent legal advice about your particular set of facts. This blog may constitute attorney advertising. This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state or jurisdiction.

[1] Zachary Harris, Jonathan Wexler, New York Enacts Trapped at Work Act to Ban Employment Promissory Notes, JD Supra, December 29, 2025, https://www.jdsupra.com/legalnews/new-york-enacts-trapped-at-work-act-to-6377302/ (Last visited on December 30, 2025).

[2] Nancy Gunzenhauser Popper, Naomi C. Friedman, Katherine Heaney, Gretel Zumwalt, New York Labor and Employment Legislation- Governor Hochul Acts on Four Bills Before Year-End, The National Law Review, December 30, 2025, https://natlawreview.com/article/new-york-labor-and-employment-legislation-governor-hochul-acts-four-bills-year-end (Last visited on December 30, 2025).

[3] Restoring Equality of Opportunity and Meritocracy, The White House, April 23, 2025,  https://www.whitehouse.gov/presidential-actions/2025/04/restoring-equality-of-opportunity-and-meritocracy/ (Last visited on December 30, 2025).

[4] Id. at 2.

[5] Id.