Corporations Want to Prevent Workers From Leaving Their Jobs
As regulators crack down on noncompete agreements that bar workers from finding better jobs, employees across the country are increasingly bound by a new form of “stay-or-pay” contract that indebts them to their bosses.
TRAPs are common in retail jobs like fast-food restaurants where extensive job training isn’t typically considered necessary. (Christopher Dilts / Bloomberg via Getty Images)
A Texas nurse switched to a better-paying job at a nearby hospital only to wind up with debt collectors at her door demanding she pay her former employer back for a loan she didn’t know she owed.
A cargo pilot faced a $20,000 lawsuit over job-training expenses at a commercial airline that had just fired him for refusing to fly a plane under unsafe conditions.
After being promised college tuition relief paid for by Chipotle, fast-food workers can get stuck with the tuition bill.
These are all examples of how millions of workers across the country are increasingly finding themselves bound by Training Repayment Agreement Provisions (TRAPs), a new form of “stay-or-pay” contract that indebts employees to their bosses. Often inserted into contracts without workers’ knowledge, these restrictive labor covenants turn employer-sponsored job training and education programs into conditional loans that must be paid back — sometimes at a premium — if employees leave before a set date.
As regulators scrutinize similarly restrictive noncompete agreements for barring workers from obtaining better employment, a Lever review of class-action and state-level lawsuits reveals that employers in health care, retail, and transportation are turning to TRAPs to keep employees locked in their jobs and potentially evade law enforcement.
“It’s student debt, but coming from employers in the workplace instead of in schools,” said Mike Pierce, the executive director and cofounder of the Student Borrower Protection Center, which has tracked the spread of TRAP contracts nationwide. Other labor leaders on the front lines of industries adopting these clauses have compared TRAPs to “indentured servitude.”
Employers argue that these clauses are a way to recoup their investment in employees who decide to leave the company prematurely. But these contracts have come under fire from labor groups and regulators. Oftentimes, the amount of debt demanded under TRAP contracts — which can be upward of $50,000 — is far higher than the employer’s training costs.
Last month, the California Attorney General’s Office announced a $1.5 billion multistate settlement with HCA Healthcare, one of the largest for-profit hospital networks in the country, for its illegal use of TRAPs to demand low-paid nurses pay for their $4,000 training expenses. As part of that initial lawsuit, the California Nurses Association conducted a survey finding that 40 percent of new nurses nationwide have been forced to sign a TRAP.
“TRAPs allowed employers to use the threat of financial ruin to prevent nurses from acting collectively to improve hospital working conditions for ourselves and our patients,” said John Pasha, a cardiovascular intensive care nurse and representative for the California Nurses Association, at a press conference. “In short, these stay-or-pay contracts handcuff us to employers that exploit our calling as nurses to care for others.”
TRAPs are just the latest example of stay-or-pay contracts that restrict worker mobility through financial and legal threats, which federal regulators have deemed exploitative. Other examples include noncompete clauses, which prohibit workers from seeking jobs across the entire sector they work in, and “no-poach agreements” between a group of employers that effectively blacklist workers and have been found to violate antitrust laws. There are also “liquidated damages provisions,” which impose cancellation fees on workers for leaving their jobs.
By blocking workers from seeking better jobs elsewhere, these agreements are weaponized to drive down wages, limit bargaining power, and lock workers into unsafe working conditions or abusive workplace environments. Constraining worker mobility can even restrict economic growth and hamper new businesses looking to attract a workforce with potentially better pay, according to research from the Federal Trade Commission (FTC).
The New Trap, Same as the Old Trap
While noncompete clauses are known to impact at least one in every five workers, there is no precise data yet on the exact number of employees bound by TRAPs.
But a new study provides a rough estimate of these contracts’ prevalence. Three Cornell University Law School researchers analyzed a 2020 online survey of several hundred workers and found that about 10 percent reported that they were in debt-fueled training agreements. The figure suggests that TRAPs could be hanging over the heads of an estimated seventeen million workers nationwide.
The finding was a huge increase from a 2014 study that found just 4 percent of workers were in TRAP contracts. And due to confusing contract language, many more employees are likely bound by such clauses without realizing it.
TRAPs have emerged because of the professionalization of the labor market. Sixty years ago, just one in twenty workers held some professional credential, compared to one in four today. And since far more jobs today require skills education or occupational licensing, employers now have to invest in these resources on-site to prepare workers for the industry.
This shift has also opened the door to a new industrial complex of employer-run, for-profit training sites and academies, which many workers are steered into when they’re hired for a job. Critics say employers now use these job training programs to force workers into debt and suppress wages, courtesy of TRAP contracts.
TRAPs started appearing in the 1990s and were almost exclusively used by employers in high-skilled, higher-wage professions like high finance and technology.
But similar to the evolution of noncompetes, companies across lower-paid sectors soon began adopting the practice. Today TRAPs have even become commonplace in retail jobs like fast-food restaurants, where extensive job training isn’t typically considered necessary.
Such debt agreements give employers an upper hand to drive down wages for already poorly paid service workers, according to Sandeep Vaheesan, a legal director at the Open Markets Institute. But constraints on worker mobility also have economywide consequences, such as prolonging labor shortages or hamstringing public response to health crises. During the height of the COVID-19 pandemic, for example, nurses employed by one hospital were legally barred from working at a nearby understaffed hospital amid surging COVID infections.
“Restricting workers from leaving their jobs might be especially harmful to working people during periods of full employment,” wrote Vaheesan in the Washington Post. “By all accounts, there are jobs to be filled. But workers can’t necessarily move to fill them.”
TRAPs, unlike other stay-or-pay contracts, operate as an unregulated financial product. The contracts typically extend a conditional loan to workers for job training, a form of credit lending that has mostly flown under regulators’ radar.
“Even if it’s not credit, it’s debt collection, so you get a financial service or consumer product in some sense,” explained Pierce with the Student Borrower Protection Center. “You are signing a note that commits you to repay that debt, separate from the employment agreement, and then enforcing that note through third-party debt collectors.”
This means that TRAPs can also include predatory lending practices, such as exorbitantly high interest rates, collection fees, and attorney legal billing. Altogether, these financial obligations can lead to enormous amounts of debt. Sometimes, to pay off the liability, workers’ retirement benefits and final paychecks are denied.
One employer used a TRAP to impose a $20,000 debt obligation on a hair stylist who typically made less than $30,000 a year for quitting her job before she’d worked there for at least five years. Meanwhile, workers at an Indiana-based metal factory were forced to pay $20,000 for seeking employment elsewhere, and drivers at a transportation company had to shell out $8,000 for leaving their posts.
According to legal experts who have litigated these cases, the amount of debt levied on workers is often conjured up by employers once an employee leaves, rather than being stipulated in the contract.
“It is often difficult to draw a direct connection between the costs that workers face under TRAPs and the cost of the training to the employee… if it is of any likely value at all,” reads a 2022 report from the Student Borrower Protection Center, “Trapped at Work.”
Opening the TRAP Door
During the Biden administration, federal regulators put restrictive labor agreements in their crosshairs after years of public outcry.
In 2023, the FTC, under Democratic former chair Lina Khan, took action by issuing a landmark rule banning noncompete agreements. The rule not only prohibited noncompetes across the board, but it also included language that would have allowed the agency to crack down on TRAPs by pursuing litigation on a case-by-case basis.
At the same time, the National Labor Relations Board and the Department of Labor pursued a handful of actions targeting TRAPS as an unfair labor practice, including at a health care staffing company and a computer programming boot camp. In both instances, the companies agreed to stop using TRAPs in the near term as part of settlement agreements.
But by failing to comprehensively prohibit TRAPs, regulators opened themselves up to criticism from antitrust and labor advocates who worried the Biden administration was shunting the problem to the courts, dragging out the legal process. Watchdogs also warned that some employers were pivoting from noncompetes to TRAPs to escape the regulatory hammer.
But any federal momentum to regulate TRAPs has been shut down under the more business-friendly Trump administration. The rule prohibiting noncompetes has been blocked by a Texas federal judge and is currently awaiting an appeal. The Republican chair of the FTC, Andrew Ferguson, voted against the regulation as a commissioner during the Biden administration and has so far deferred a decision about whether to continue defending the rule on appeals.
Instead, the matter has moved to the states, which are now pushing to ban stay-or-pay contracts. The California and Pennsylvania legislatures have passed bills this year prohibiting TRAPS, which are now awaiting signatures by the states’ Democratic governors.
The California attorney general’s $1.5 billion TRAP settlement with HCA Healthcare last month, which required the hospital network to stop enforcing all such agreements, points to another path forward for state-level action that, for now, circumvents Donald Trump’s agencies.
According to Pierce, the lawsuit took a novel approach by claiming that TRAPs, as financial products, violate the federal Consumer Protection Act as an unfair and deceptive practice. Colorado adopted a similar tactic when it recently filed a complaint against the pet store chain PetSmart for forcing dog grooming employees into debt contracts for their training.
“We’re seeing a flurry of state lawmakers and attorneys general step in and be very aggressive in recent months as the Trump administration has pulled back,” said Pierce.