Readers may recall that in 2024 the Federal Trade Commission (FTC) promulgated a rule banning Training Repayment Agreement Provisions (TRAPs), which require employees to repay their employers for training if the employee leaves within a specified period of time. The FTC considered TRAPs to be “functional non-competes.” That rule was struck down by a federal district court, and after the current administration took office, the FTC withdrew its appeal. With the FTC’s attempted federal ban on TRAPS now defunct, state governments are increasingly adopting statutes and regulations to restrict or prohibit “stay or pay” arrangements. Connecticut and New York employers must take steps to ensure compliance with two new laws with fast-approaching deadlines: Connecticut’s expanded “Stay or Pay” prohibition (effective October 1, 2026), and New York’s “Trapped At Work Act” (effective on or after December 2026).
The following advisory details each law’s requirements and highlights key steps employers that employers should take now before they take effect.
Connecticut’s Expanded “Stay or Pay” Law
Since 1985, Connecticut has prohibited “employment promissory notes,” which are agreements requiring an employee to pay or repay specific sums to the employer if the employee leaves before a stated period expires. Previously, this rule applied only to employers with more than 25 employees. Effective October 1, 2026, however, the law will be amended and expanded as follows:
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