It's a TRAP! Labor Board Seeks to Prohibit Use of Training Repayment Agreement Provisions

Earlier this month, the story of Drew Lakey, a physician assistant in California, drew widespread interest across the internet (including numerous TikToks) after the New York Times featured her in a story about employers seeking to recover the costs of training employees. Lakey's former employer sought repayment and consequential damages related to her former employer's "inability to transfer Ms. Lakey’s responsibilities to someone new." In Lakey's particular case, her former employer, the Skin and Cancer Institute, sought nearly $140,000 in damages.

Training repayment agreements or training repayment agreement provisions – as multiple government agencies have so stylized for the clever acronym TRAPs – are contracts that require workers to pay back training costs if they leave their jobs before the end of a certain time period. TRAPs have become increasingly common in recent years, with employers utilizing them as a retention tool within their workforces. 

However, such agreements are now under the intense scrutiny of not only many state governments, but also multiple federal agencies within the Biden administration that are seeking to curb their use altogether.

States such as Connecticut and Colorado already limit their use and additional legislation has been introduced in California, Pennsylvania and New York. While at the federal level, the Federal Trade Commission proposed a rule in January that would not only ban most non-compete agreements, but also TRAPs, labeling them de facto non-competes. The Consumer Financial Protection Bureau has also been investigating their impact. 

The most notable federal agency stepping up to the plate on this particular issue, and the mostly likely to strike such provisions down first with the force of law, is the National Labor Relations Board (NLRB). Earlier this year, the NLRB's general counsel, Jennifer Abruzzo, called out these agreements as unlawful in her May 2023 memorandum on the lawfulness of non-competition provisions. According to Abruzzo, non-compete and similar restrictive employment provisions, like TRAPs, are unlawful because they “tend to chill employees in the exercise of Section 7 rights” to engage in concerted activity under the National Labor Relations Act (NLRA), particularly that it limits an employee's ability to leave their job, in turn stifling their ability to leverage resignation as a bargaining tactic against their current employer. 

While Abruzzo's memo did not have the force of law, it did direct NLRB Regional Offices to submit any such cases to the Division of Advice (the board's way of soliciting its preferred cases so it can set precedent). And it looks like the NLRB may have found its case.  

In early September, the NLRB issued a complaint against Juvly Aesthetics for demanding that two of its former employees pay it $50,000 and $60,000 for the cost of training during their employment. While the matter is still in its early stages, employers should have little doubt on the path this will take as the matter progresses before the board – TRAPs are likely to be prohibited under the NLRA. With this tool for retention soon to be removed from their retention toolbox, employers should begin thinking about their current practices and how they may pivot to other strategies to not only retain good talent, but also safeguard their investments in their workforce.