Employee Training Repayment Agreement Provisions: Increased Scrutiny, Litigation Update, Pitfalls to Avoid

This CLE webinar will examine the risks employers face when using training repayment agreement provisions (TRAPs), also known as "stay or pay" provisions, in employment agreements. The panel will address the status of federal enforcement and increased scrutiny by states. The panel will discuss notable legislation and litigation resulting in high-dollar settlements against employers and offer best practices for mitigating the risk of enforcement action when using TRAPs. 

TRAPs, also known as "stay or pay" provisions, require employees to repay specified amounts for employer-provided training if the employee leaves their job before a specified time. While TRAPs were historically used for high-paying and/or specialized positions, they are now increasingly used for broader groups of employees, in part to protect the loss of company investment in the employee in response to regulatory efforts to limit the use of noncompetes. Even though federal scrutiny of TRAPs seems to have subsided to some degree under the current administration, state attorneys general have increased enforcement action against employers for TRAP use and states have passed or advanced legislation targeting these provisions.

Recent high-visibility litigation and costly settlements demonstrate this increased scrutiny and under what laws the states are pursuing such actions. For example, the attorneys general of California, Colorado, and Nevada recently announced a settlement with a healthcare organization where the company agreed to pay approximately $3.5 million to settle claims that it unlawfully "trapped" new nurses in overly restrictive training repayment agreements where the entry level registered nurses were required to sign the agreements as a condition of participating in mandatory specialty training programs. If the nurse left employment within two years of the training, they were required to pay back a prorated amount of the value of the training. The states alleged that the company's agreement violated consumer protection laws.

Another Colorado action alleges that an employer's use of TRAPs violates state consumer protection and labor laws and constitutes deceptive trade practices where the company allegedly enrolled prospective employees in a "free" training class, but required them to sign a TRAP agreement whereby they would pay $5,500 if they left within 11 months of their start date or $2,750 if they left between their first and second year of employment.

Listen as our expert panel examines the risks of using TRAPs in employment agreements. The panel will examine the status of federal enforcement action and the increased scrutiny by states including notable legislation and litigation. The panel will also offer best practices for determining whether to use TRAPs and how to draft these provisions to minimize the risk of enforcement action.