Increasing Restrictions on “Stay-or-Pay” / Training Repayment Agreements

Employers should be aware of a growing trend among states to restrict or prohibit “stay-or-pay” provisions—also known as training repayment agreement provisions (TRAPs)—which require employees to repay training costs if they leave employment within a specified period. These laws reflect an increasing focus on employee mobility and a regulatory view that such agreements may function as de facto non-compete restrictions. 

Leading this trend, California Assembly Bill 69 (effective January 1, 2026) broadly prohibits most repayment obligations tied to separation of employment. This includes repayment obligations for employer-provided training, internal onboarding programs, and mandatory job-related instruction with only narrow exceptions for tuition assistance tied to a transferable credential (such as degrees or external certifications). 

New York has enacted the “Trapped at Work Act,” (effective February 13, 2027) which generally bans agreements requiring repayment of training costs. The Act, recently amended, narrows repayment agreements to narrowly defined exceptions such as signing bonuses or relocation assistance if the employee is terminated for misconduct. The amendment also narrowed the scope to “employees” removing coverage for independent contractors, Interns, and Volunteers. 

Colorado permits training repayment only for costs that are distinct from normal on-the-job training and requires that repayment amounts be reasonable and prorated over time. Wyoming allows repayment provisions but mandates a declining, prorated structure based on tenure. Connecticut has long restricted employers from imposing job-related debt on employees. Indiana and Pennsylvania have enacted industry-specific limitations (notably in healthcare).  

While average employer training costs are estimated at $800–$1,100 per employee, many training repayment provisions require employees to repay significantly higher amounts—often ranging from $5,000 to $50,000 depending on the industry. This disparity has become a central focus of regulators, who increasingly view inflated repayment obligations as punitive rather than a legitimate recovery of training expenses. Agreements that exceed actual, documented training costs or include indirect expenses (wages or administrative overhead) are at heightened risk of being challenged or deemed unenforceable.  

For government contractors and other multi-state employers, this trend presents heightened legal and operational risk. Agreements that are enforceable in one jurisdiction may be void or trigger penalties in another—particularly where repayment exceeds actual costs. Employers should review existing agreements to ensure they are narrowly tailored, reflect bona fide and reasonable costs, and comply with applicable state laws.