ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Thursday, October 5, 2023

Training Repayment Agreements in the News

Just yesterday, we posted about the debate over the FTC's plans to rein in non-competes.  One response has been Training Repayment Agreements (TRAs) or better still, Training Repayment Agreement Provisions (TRAPs). Thanks to guest contributions from Jonathan Harris (below left) here and here, as well as Miriam Cherry's review of Jonathan's work over at Jotwell, we have already been able to introduce readers to the topic.  Last week, H. Claire Brown published an article in The New York Times indicating how TRAPs work.

HarrisThe article begins with an illustration.  A physician assistant signed a TRAP when she began work, as part of the first day of work ritual at which your employer presents you with the take-it-or-be-unemployed terms of your employment.  The TRAP provided that she would be required to reimburse her employer $50,000 for on-the-job trainings she received if she left the job before 2025.  She left, providing four-months notice, and her former employer sued, seeking to recover $38,000 in training fees (a ridiculous valuation for the training the employee received) plus $100,000 (a suspiciously round and therefore almost certainly made-up number) supposedly representing loss of business.   One wonders on what theory they think they can recover such lost profits.

In a second illustration, we learn of another medical professional who took a job that paid $35,000/year.  After more than two years on the job, she tried to leave, and her employer sued her for $30,000 in training costs.

According to The Times, nearly 40% of nurses who joined the profession in the last decade have to sign a TRAP.  In California, TRAPs are already unenforceable if they amount to an attempt to shift training costs to employees.  They are only enforceable if designed to allow employees to improve their skills sets in ways that will benefit them throughout their careers.  Even so, The Times notes, the FTC has proposed rules that will ban TRAPs to the extent that they function as non-compete clauses.    Some states have already banned TRAPs.  

Jonathan Harris's spidey sense must have been tingling, because he just shared with us news of this story about the National Labor Relations Board suing an employer that allegedly subjects its employees to unlawful confidentiality, non-disparagement, non-compete, no-solicitation, and training repayment provisions.

https://lawprofessors.typepad.com/contractsprof_blog/2023/10/training-repayment-agreements-in-the-news.html

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