Seyfarth Synopsis: Connecticut has enacted amendments to its longstanding prohibition on “stay‑or‑pay” agreements that expand the law’s application to all employers and reinforce restrictions on agreements requiring repayment as a condition of employment. While the core prohibition remains unchanged, the expanded coverage reflects a broader national trend limiting the use of such arrangements. Employers should evaluate their existing agreements and consider whether state‑specific or national compliance strategies are appropriate.
Connecticut has long prohibited employers from requiring employees to execute an “employment promissory note”—defined broadly as any agreement requiring an employee to pay the employer if the employee leaves employment before a stated period of time, including repayment framed as reimbursement for training.
On May 11, 2026, Governor Ned Lamont signed comprehensive workforce legislation (H.B. 5003) that significantly expands this framework. Effective October 1, 2026, the amended law will extend the prohibition to all employers, regardless of size; and reinforce that agreements requiring repayment tied to early separation are void as against public policy, subject only to narrow statutory exceptions. Previously, the prohibition applied only to employers with 26 or more employees, meaning this change will bring smaller employers squarely within the statute’s scope for the first time.
Prohibition and Narrow Exceptions
As expanded, Connecticut law prohibits employers from requiring, as a condition of employment, that employees agree to repay money if they leave employment before a specified period. The law’s definition of prohibited agreements is intentionally broad and includes: (i) training repayment agreements; (ii) agreements requiring reimbursement for onboarding or certification costs; and (iii) any arrangement, imposed as a condition of employment, that requires payment upon early separation, regardless of how it is characterized.
The statute focuses on substance over form, and labeling a payment obligation as “training reimbursement” does not avoid the prohibition.
The statute preserves a limited set of exceptions for agreements that:
- Require repayment of advances of money (e.g., loans or prepaid amounts);
- Require payment for property sold or leased by the employer to the employee;
- Relate to sabbatical leave arrangements; or
- Are part of certain collectively bargained programs.
Outside of these narrow categories, however, repayment obligations imposed as a condition of employment and tied to continued employment are likely to be unenforceable, limiting the extent to which such arrangements can be structured or characterized to fall within an exception.
Comparison to New York and California
Connecticut’s approach differs materially from other recent “stay‑or‑pay” statutes. As discussed previously here, here, and here, New York permits certain repayment arrangements under defined statutory exceptions, including non‑educational financial incentives and costs associated with obtaining transferable credentials, subject to strict conditions.
California’s AB 692 similarly imposes significant restrictions and compliance requirements on repayment provisions, though it remains a framework that regulates—rather than eliminates—such arrangements (see here).
By contrast, Connecticut adopts a more categorical prohibition on employment‑conditioned repayment arrangements, creating a stricter framework than either New York or California. The statute does not establish a standalone enforcement mechanism or civil penalty framework, and instead renders covered provisions void as against public policy.
Next Steps for Employers
With the October 1, 2026 effective date approaching, employers should:
- Review and amend existing agreements (including offer letters, training reimbursement agreements, retention arrangements, and programs involving sign‑on bonuses, relocation assistance, immigration sponsorship, and tuition or education-related assistance) for provisions that may require repayment upon early separation;
- Reevaluate training and retention incentive strategies to consider restructuring such incentives to be paid out at the end of any desired retention period, particularly where programs rely on repayment obligations; and
- Consider multistate compliance approaches, including whether to adopt state‑specific or uniform national practices in light of differing legal requirements.
Employers should also continue to monitor developments in this area, as additional jurisdictions may adopt similar restrictions.
Please reach out to the authors – or your Seyfarth attorney – with any questions.
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