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Highlights
Impacted employers: Public and private New York employers
Effective date: Effective immediately
Summary: New York prohibits promissory notes requiring an employee to repay training expenses if they leave their employment before the note period expires.
Next steps: Review training and termination policies and procedures.
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The details
New York has enacted legislation (Senate Bill S4070B), which bans promissory notes that require an employee to repay their employer for training expenses if the employee leaves their employment before the note period expires. Senate Bill S4070B is effective immediately.
Under the law, no employer may require, as a condition of employment, a worker or prospective worker, to execute a promissory note as a condition of employment (the notes will be unenforceable and null and void under the law).
The law defines a promissory note as an instrument, agreement, or contract provision that:
- Requires a worker to pay their employer (or the employer's agent or assignee) money if they leave their employment before a stated period of time has passed.
- States that the payment of money is reimbursement for training provided to the worker by the employer or by a third party.
Note: If a promissory note is part of a larger agreement, the invalidity of the note does not affect the other provisions of the agreement.
Covered Employers
The law covers individuals, partnerships, associations, corporations, LLCs, trusts, government or government subdivision, and an organized group that hires or contracts with a worker to work for the employer, including when any of these employers (including subsidiaries of the employer) provide training to workers. See the text of the law for further details.
Covered Workers
The law covers an individual who is permitted to work for or on behalf of an employer, including employees, independent contractors, externs, interns, volunteers, apprentices, sole proprietors, and those who provide services through a business or certain nonprofits.
Note: An individual who performs incidental services for the employer, but whose sole relationship with the employer is as a vendor of goods, is not covered under the law
Unaffected Agreements
The law states that an employer may continue to enforce agreements that:
- Require a worker to:
- Require educational personnel to comply with terms or conditions of sabbatical leaves; or
- Relate to programs agreed to under a collective bargaining agreement.
Penalties
Any employer found to have violated the law may face penalties of $1,000 to $5,000 per violation. Each worker or prospective worker who is required to execute an employment promissory note or who has one enforced against them will count as a separate violation.
Next steps
- Review training and termination policies and procedures.
- Train supervisors on the changes under the law.