What Employers, Medical Practices, and Healthcare Businesses Must Change in 2026
New York has quietly enacted one of the most consequential employment law changes in recent years, and many businesses have not yet updated their contracts.
In late December 2025, New York passed Senate Bill S4070A, commonly referred to as the “Trapped at Work Act.” The law fundamentally changes how employers may use training repayment, stay-or-pay provisions, and similar repayment obligations tied to continued employment.
For healthcare practices, med spas, and other businesses that regularly invest in onboarding, certifications, and training, this law requires immediate attention.
What the New Law Does
At its core, the law prohibits employers from requiring workers to sign repayment agreements as a condition of employment when those agreements require payment if their employment ends before a specified period of time.
The statute labels these provisions employment promissory notes and declares them:
- Unconscionable
- Against public policy
- Unenforceable as a matter of law
Importantly, the prohibition applies regardless of how the clause is labeled. Calling something a “training reimbursement,” “education recovery,” or “retention agreement” does not save it if it functions as a penalty for leaving a job.
Who Is Protected by the Law
The law applies broadly and protects far more than traditional W-2 employees.
Covered workers include:
- Employees
- Independent contractors
- Interns
- Apprentices
- Volunteers
- Sole proprietors providing services
This breadth is especially important for healthcare and med spa businesses that rely on a mix of employees and independent contractors.
Vendor agreements for goods are excluded, but most service arrangements fall within the scope of the statute.
Common Provisions That Are Now Prohibited
Under the new law, employers may no longer require workers to repay money simply because they leave employment early.
Examples of provisions that are now unenforceable include:
- Requiring repayment of onboarding or training costs if the worker leaves within a set period
- Requiring repayment of certification or course fees tied to retention
- Stay-or-pay clauses that financially penalize early departure
- Any agreement that effectively locks a worker into continued employment through debt
If these provisions appear in offer letters, employment agreements, or contractor agreements, they should be removed or revised immediately.
Limited Exceptions and Why They Are Risky
The statute includes narrow exceptions, but they are often misunderstood.
Certain repayment obligations may still be permissible if they:
- Are not a condition of employment
- Are set out in a separate agreement
- Clearly specify the repayment amount
- Are reasonably prorated over time
- Do not function as a penalty for quitting
These exceptions are construed narrowly, and regulators are expected to scrutinize them closely. Businesses should not assume an exception applies without careful legal review.
Enforcement and Penalties
The New York State Department of Labor is authorized to enforce the law.
Penalties range from $1,000 to $5,000 per violation, and each affected worker counts as a separate violation.
The law also exposes employers to:
- Invalidated contract provisions
- Potential litigation
- Attorneys’ fees if enforcement is attempted in court
In practical terms, the risk is not just theoretical. Agreements that once felt standard are now a liability.
Part of a National Trend
The enactment of New York’s “Trapped at Work” law reflects a broader national trend toward banning or significantly restricting training repayment agreements. California has similarly moved in this direction with the passage of AB 692, which, effective January 1, 2026, prohibits contractual provisions that require payment triggered by the termination of a worker’s employment. Connecticut also generally bars the use of promissory notes requiring employees to repay training costs if they leave before a specified period, subject to limited exceptions for small employers. Colorado has not imposed a complete ban but has enacted stringent restrictions, permitting repayment agreements only in narrowly defined circumstances. Other states are following suit, with legislation introduced in Ohio, Vermont, Nevada, and Washington to ban or heavily restrict these types of repayment provisions.
Why This Matters for Healthcare and Med Spa Businesses
Healthcare employers are disproportionately affected by this law because they often:
- Invest heavily in training
- Pay for certifications or onboarding
- Use retention-based repayment structures
- Employ independent contractors alongside employees
In regulated industries, contracts are already scrutinized. This law adds another layer of exposure and makes outdated templates especially dangerous.
What Employers Should Do Now
Businesses operating in New York should take immediate steps to ensure compliance.
Audit Existing Agreements
Review all:
- Offer letters
- Employment agreements
- Independent contractor agreements
- Training reimbursement clauses
- Retention or clawback provisions
Any clause that requires repayment tied to employment termination should be flagged for review.
Update Templates and Onboarding Documents
Standard forms should be revised to remove prohibited language and align with the new statute.
Rethink Retention Strategies
Retention must now be driven by:
- Compensation structure
- Career development
- Culture and advancement
- Incentives that reward staying, not punish leaving
Consult Counsel Before Using Exceptions
If you believe a repayment arrangement may qualify for an exception, it should be reviewed carefully before use. Getting this wrong can be costly.
Bottom Line
New York’s Trapped at Work Act represents a clear policy shift away from debt-based retention and toward worker mobility.
For employers, especially in healthcare and medical aesthetics, this law requires immediate contract review and thoughtful restructuring of training and retention practices.
At Lengea Law, we work with healthcare and med spa businesses nationwide on employment compliance, contractor structuring, and regulatory risk management. We help clients identify problematic provisions, update agreements, and build compliant strategies that hold up under scrutiny.
If your business operates in New York and has not reviewed its employment and contractor agreements in light of this law, now is the time. Even for businesses operating outside New York, these developments signal a broader national trend, and employers with concerns about training repayment provisions or retention practices in their state should contact Lengea Law to assess risk and ensure their agreements remain compliant as laws continue to evolve.