Business Vantage Point Blog

As the third quarter unfolds, employers in New York and New Jersey continue to face a host of new legal obligations in 2026 that will shape workplace policies and practices going forward. From contract restrictions to expanded leave rights, the latest legislative changes demand careful attention and prompt action from businesses of all sizes.

The Trapped at Work Act and Employment Contracts in New York

New York’s new Trapped at Work Act, although initially signed into law last December, will take effect on December 19. It prohibits employers from requiring employees (but not independent contractors, interns, externs, volunteers, etc.) to sign “employment promissory notes.” These notes typically obligate workers to repay their employer if they leave their job, often for costs associated with training or other employment-related expenses.

Several exceptions exist. Repayment agreements are permitted to reimburse employers for costs related to tuition, fees and required education for a “transferable credential,” meaning an industry-preferred qualification enhancing the employee’s position with respect to other candidates. Repayment agreements for transferable credentials must contain set terms. First, repayment agreements for transferable credentials must be formalized in a separate contract from the employment agreement. Second, execution of the repayment agreement for transferable credentials must not be conditional on employment. Further, the repayment agreement itself must contain a specific repayment amount, subject to a cap of actual costs; permit proration; prohibit acceleration; and waive repayment if the employee is terminated for any reason besides misconduct.

Other exceptions detail that employers may still require repayment for sums advanced to employees, provided those sums are not for training related to employment. Repayment agreements are also permitted for property sold or leased to the worker, for educational personnel complying with sabbatical terms, or when the agreement is part of a collective bargaining program. The Trapped at Work Act further permits repayment agreements requiring an employee to reimburse signing bonuses, relocation assistance and other nonperformance-based benefits where the employee is terminated for misconduct or misrepresented the job duties.

Employees do not have a private right of action under the Trapped at Work Act, but if an employer sues to enforce a promissory note that is void under the statute, the employee can recover attorney fees. Employers that violate the law are subject to fines — $1,000 to $5,000 per violation — making compliance essential.

Expanded Leave Rights in New York City and New Jersey

Leave laws are evolving. In New York City, the Earned Safe and Sick Time Act (ESSTA) and the Temporary Schedule Change Act (TSCA) were updated, effective February 22. The ESSTA now codifies paid prenatal leave, granting eligible employees 20 hours of paid prenatal leave within a 52-week period. Employers should ensure their policies are updated, notify all employees, and keep detailed records of leave usage and balances. Additionally, employees are entitled to 32 hours of unpaid safe and sick time immediately upon hire and at the start of each calendar year, with no waiting period for use. The reasons for using this time have been expanded to include caregiving, workplace violence, public disasters, and legal proceedings related to subsistence benefits or housing.

The TSCA has been scaled back, so employers are no longer required to approve up to two temporary schedule changes annually for personal events. Instead, because such leave requests are now covered by the ESSTA, employers have more discretion to approve, deny or propose alternatives to temporary schedule changes.

In New Jersey, the Family Leave Act (NJFLA) was expanded on July 17. NJFLA now covers employers with as few as 15 employees (down from 30), and employees become eligible for leave after three months of employment and 250 hours worked in the preceding 12-month period. Importantly, employees who take medical leave and receive temporary disability insurance or family leave insurance benefits must be restored to their previous job or an equivalent position upon returning to work.

New Restrictions in New York on Employment Decisions

Employers in New York should also be aware of new restrictions on the use of consumer credit checks in employment decisions. The New York Fair Credit Reporting Act was amended effective April 18 making it an unlawful discriminatory practice to use consumer credit reports in most employment decisions (N.Y. Gen. Bus. Law § 380-b(d)). There are exceptions for positions where such credit checks are required by law, including for law enforcement roles, for jobs requiring bonding or security clearance, and for certain positions involving significant financial or digital security responsibilities. However, for most roles, employers will need to remove credit checks from their hiring and employment processes.

Disparate-Impact Discrimination Codified in New York

New York has also taken a major step in codifying protections against disparate-impact discrimination. The New York State Human Rights Law was amended last December to now explicitly prohibit employment practices that have a discriminatory effect, regardless of the employer’s intent (N.Y. Exec. Law § 296(5-b).) This means that if a policy or practice actually or predictably results in a disparate impact on a protected class, it may be unlawful. Plaintiffs need only demonstrate that the practice causes or is likely to cause such an impact. Employers can defend their practices by showing the practices are job-related and consistent with business necessity, but must now support this justification with concrete evidence, not just hypothetical or speculative arguments, and that the necessity cannot be served by a less-discriminatory alternative.

New York and New Jersey Minimum Wage and Compensation Changes

As of January 1, the minimum wage in New York City and Nassau, Suffolk and Westchester counties increased to $17 per hour, with the weekly salary threshold for executive and administrative employees set at $1,275 (or $66,300 annually). The rest of New York state saw a minimum wage of $16 per hour and a weekly salary threshold of $1,199.10 ($62,353.20 annually). The professional exemption in New York continues to follow the federal threshold of $35,568 per year.

In New Jersey, effective January 1, the statewide minimum wage increased to $15.92 per hour, with agricultural workers earning at least $14.20 and direct care staff in long-term care facilities receiving $18.92 per hour.

Both states have also updated their rules regarding tipped employees for 2026. In New York City and surrounding counties, tipped service employees must receive a cash wage of $14.15 with a $2.85 tip credit, while tipped food-service workers must be paid $11.35 in cash wages with a $5.65 tip credit. New Jersey’s tipped employees must receive at least $6.05 per hour in cash wages, with a $9.87 tip credit, and employers are required to make up any shortfall if tips plus cash wages do not meet the minimum wage.

Looking Ahead

The employment law landscape in New York and New Jersey is more complex than ever, with new rules affecting contracts, compensation, hiring, discrimination and leave. (For California, see our previous blog post.) Employers should act now to review and update their policies, train HR staff, and ensure compliance with these sweeping changes. Staying ahead of these developments will help organizations avoid costly penalties and foster a compliant workplace in 2026 and beyond.

For tailored guidance and to ensure your organization is fully compliant, it is always wise to consult with employment counsel familiar with the latest state and local developments.