Connecticut’s Ban on Employment Promissory Notes: What Public Act 26-12 Changes for Employers and Workers

Effective October 1, 2026, Public Act No. 26-12 amends Connecticut General Statutes § 31-51r by eliminating its longstanding size threshold, extending Connecticut’s statutory prohibition on employment promissory notes to all employers operating in the state.¹ Previously, the statute applied only to employers with twenty-six or more employees, leaving smaller employers free to require departure-triggered repayment agreements under general common-law contract principles.² The amended statute establishes a uniform rule: no employer in Connecticut, regardless of headcount, may require an employee to execute an agreement conditioning departure upon the repayment of money or training expenses as a condition of employment.³

Prior Law: The 26-Employee Threshold and the Small-Employer Exemption

Enacted in 1985, Conn. Gen. Stat. § 31-51r prohibited employers from requiring employees or prospective employees to execute an “employment promissory note” as a condition of employment.⁴ However, former Conn. Gen. Stat. § 31-51r(a)(1) limited the definition of “employer” to:

“[A]ny person engaged in business who has twenty-six or more employees, including the state and any political subdivision thereof.”⁵

Under that threshold, the law established two distinct categories of employers:

• Employers with 26 or more employees: Strictly prohibited from requiring promissory notes, training repayment agreements, or tenure-based departure covenants as a condition of hire or continued employment.
• Employers with 1 to 25 employees: Completely exempt from the statute. Small businesses, trade contractors, and boutique professional firms could lawfully include training reimbursement clauses and departure-repayment terms in employment agreements, governed solely by common-law contract rules and liquidated damages standards.

Public Act 26-12: Universal Prohibition on Employment Promissory Notes

Public Act No. 26-12, Section 4, amends Conn. Gen. Stat. § 31-51r(a)(1) effective October 1, 2026, by striking the twenty-six-employee requirement.⁶ The revised definition encompasses any person engaged in business, including the state and any political subdivision thereof.

Under Conn. Gen. Stat. § 31-51r(a)(3), an “employment promissory note” is defined as:

“[A]ny instrument or agreement executed on or after October 1, 2026, which requires an employee to pay the employer, or such employer’s agent or assignee, a sum of money if the employee leaves such employment before the passage of a stated period of time. ‘Employment promissory note’ includes any such instrument or agreement which states such payment of moneys constitutes reimbursement for training previously provided to the employee.”⁷

Public Act No. 26-122, § 5, effective from passage and signed June 2, 2026, provides that the definition of an employment promissory note does not include a note for repayment of an employer-paid H-1B visa fee.¹³

Subsection (b) sets forth the statutory prohibition, the legal consequence of a violation, and the rule of severability:

“On or after October 1, 2026, no employer may require, as a condition of employment, any employee or prospective employee to execute an employment promissory note. The execution of an employment promissory note as a condition of employment is against public policy and any such note shall be void. If any such note is part of an employment agreement, the invalidity of such note shall not affect the other provisions of such agreement.”⁸

The operative impact of the amendment is straightforward. Small employers (1 to 25 employees) that previously operated outside the statute are now subject to the identical ban governing larger firms. Conditioning employment on an agreement to repay training expenses or pay departure penalties, executed on or after October 1, 2026, is void as against public policy across all enterprises. By statutory severability, the invalidation of the repayment clause does not void the remainder of the employment contract; other provisions, such as non-disclosure or assignment of intellectual property, remain governed by ordinary contract law.

The Four Statutory Exceptions Under Conn. Gen. Stat. § 31-51r(c)

Conn. Gen. Stat. § 31-51r does not prohibit all financial arrangements between employers and employees. Subsection (c) establishes four specific statutory exceptions where repayment agreements remain enforceable:⁹

1. Repayment of Advances (§ 31-51r(c)(1)): An agreement “requiring the employee to repay to the employer any sums advanced to such employee.”

2. Property Sold or Leased (§ 31-51r(c)(2)): An agreement “requiring the employee to pay the employer for any property it has sold or leased to such employee.”

3. Educational Sabbatical Leaves (§ 31-51r(c)(3)): An agreement “requiring educational personnel to comply with any terms or conditions of sabbatical leaves granted by their employers.”

4. Collective Bargaining Programs (§ 31-51r(c)(4)): An agreement “entered into as part of a program agreed to by the employer and its employees’ collective bargaining representative.”

Outside of these four enumerated subdivisions, the statute provides no general exception for employer-funded trade training, commercial driver’s licenses, or professional credentialing. Conditioning employment on reimbursing these costs upon early departure is void.

Practical Implications and Wage Law Restrictions

Public Act 26-12 creates immediate operational and legal consequences for Connecticut employers and workers:

1. Contract Audits for Small Employers: Employers with 1 to 25 employees must review their onboarding documents, offer letters, and employee handbooks. Any clause requiring an employee to reimburse the employer for training or pay a sum of money upon leaving before a designated period is void if executed on or after October 1, 2026, and cannot be required as a condition of hire or retention.

2. Paycheck Deductions Are Prohibited: When an employee leaves, an employer cannot deduct disputed training costs or promissory note balances from the employee’s final paycheck unless the deduction is one of the five paths in § 31-71e. Conn. Gen. Stat. § 31-71e prohibits withholding or diverting any portion of an employee’s wages unless authorized under five strict statutory paths.¹⁰ Under § 31-71e(2), voluntary deductions require written authorization on a form approved by the Labor Commissioner.

3. Exposure Under Conn. Gen. Stat. § 31-72: Withholding wages to recoup training costs or promissory note balances exposes the employer to statutory liability under Conn. Gen. Stat. § 31-72. Under § 31-72, an employee may bring a civil action to recover twice the full amount of unpaid wages, with costs and such reasonable attorney’s fees as may be allowed by the court, or, if the employer establishes that the employer had a good faith belief that the underpayment of wages was in compliance with law, the full amount of such wages or compensation, with costs and such reasonable attorney’s fees as may be allowed by the court.¹²

Bottom Line

Public Act 26-12 eliminates the 26-employee threshold in Conn. Gen. Stat. § 31-51r, establishing a universal prohibition against employment promissory notes and mandatory training repayment agreements across all Connecticut employers. An agreement executed on or after October 1, 2026, is void as against public policy if it is required as a condition of employment. Employers seeking to enforce valid debts must fit strictly within the four exceptions of § 31-51r(c) and must pursue recovery through independent civil claims rather than payroll deductions.

Authorities Cited

1. Conn. Pub. Act No. 26-12, § 4 (effective Oct. 1, 2026). ↩
2. Conn. Gen. Stat. § 31-51r(a)(1) (pre-amendment text). ↩
3. Conn. Gen. Stat. § 31-51r(b). ↩
4. Conn. Pub. Act No. 85-521, § 2. ↩
5. Conn. Gen. Stat. § 31-51r(a)(1). ↩
6. Conn. Pub. Act No. 26-12, § 4. ↩
7. Conn. Gen. Stat. § 31-51r(a)(3). ↩
8. Conn. Gen. Stat. § 31-51r(b). ↩
9. Conn. Gen. Stat. § 31-51r(c)(1)-(4). ↩
10. Conn. Gen. Stat. § 31-71e. ↩
11. Conn. Gen. Stat. § 31-72. ↩
12. Conn. Pub. Act No. 26-122, § 5 (effective from passage). ↩