Connecticut Expands "Stay-or-Pay" Restrictions: What This Means for Your Mobility Program

What's Happening

Connecticut has enacted legislation that significantly impacts relocation repayment agreements. Governor Lamont signed HB 5003 on May 11, 2026, expanding the state's prohibition on "employment promissory notes" to all employers. Effective October 1, 2026, agreements requiring employees to repay relocation costs if they leave before a stated period may be unenforceable for Connecticut employees.

We previously shared guidance on California's AB 692 (effective January 1, 2026) and New York's Trapped at Work Act (effective December 19, 2026). Connecticut's law is notably more restrictive than both.

Why Connecticut Is Different

Unlike New York, which explicitly permits repayment agreements for relocation assistance, sign-on bonuses, and retention bonuses, Connecticut takes a broader prohibitive approach. The law voids any agreement that requires an employee to repay the employer if they leave before a specified period, and relocation assistance is not carved out.

The only exceptions Connecticut permits are:

• Sums advanced directly to the employee
• Property sold or leased to the employee
• Sabbatical leave terms for educational personnel
• Provisions in collective bargaining agreements

Many relocation programs go beyond direct cash advances to employees, paying vendors for household goods shipments, temporary housing, and other services. This means traditional relocation repayment agreements may not qualify under Connecticut's exceptions.

Who's Affected

The law applies to all employers (previously only those with 26+ employees) and covers any employee who works primarily in Connecticut, resides in Connecticut, or has an employment contract governed by Connecticut law — including remote workers.

Key Compliance Date

October 1, 2026 — Any employment promissory note executed on or after this date as a condition of employment will be void as against public policy.

Suggested Next Steps

1. Identify exposure. Determine which employees and pending relocations involve Connecticut jurisdiction.
2. Engage legal counsel immediately. Have your employment attorneys assess whether your current repayment agreements can be restructured to fall within Connecticut's narrow 'sums advanced' exception. If not, those costs may need to be absorbed as business expenses.
3. Review program structure. Consider whether relocation benefits can be restructured as direct cash advances to employees (rather than vendor payments) to potentially qualify under the exception. Note that this creates operational and tax complexities that should be evaluated.
4. Audit job descriptions. While Connecticut's law doesn't include a misrepresentation provision like New York's, accurate job documentation remains a best practice across all jurisdictions.
5. Decide on multi-state approach. If you operate in California, New York, and Connecticut, weigh the administrative simplicity of eliminating repayment agreements for employees in restrictive states against jurisdiction-specific solutions.

The Bigger Picture

Connecticut joins a growing list of states restricting "stay-or-pay" provisions. California and New York have enacted similar (though less restrictive) laws, and Colorado, Georgia, Illinois, Louisiana, Michigan, Montana, Oklahoma, and Wyoming already have related legislation on the books. Companies should expect continued legislative activity and build compliance flexibility into their mobility programs.