When you accepted that job offer, did you agree to stay or pay?
Can your employer trap you into paying thousands of dollars when you quit your job?
Stay or pay: quitting is gonna cost you
It’s already happening. Employees sign agreements to reimburse their company for training expenses if they don’t stick around for a year, two years, or even more. Employers say they need to use these “stay or pay” clauses in employment contracts because jobs are difficult to fill when newly trained hires quit and take their training with them.
The New York Times Magazine (paywall protected) reports that the Federal Trade Commission and the Consumer Financial Protection Bureau are now taking measures to end this widespread indentured-servitude trend. Meanwhile, the costs of training are trapping workers across industries and jobs.
“A typical stay-or-pay clause [in an employment contract] is called a training-repayment-agreement provision (TRAP), which stipulates that the cost of on-the-job training will be borne by the employee.”
Who pays for overhead?
It kinda brings to mind restaurants that now charge their overhead costs to their customers — in the form of surcharges to cover credit card fees. That would have been unheard of 30 years ago. In fact, credit card accounts for merchants once prohibited merchants from passing credit card fees on to users. The use of a credit card was marketed as a benefit, not a cost.
Likewise, training was once held out as a benefit and as a reason to join a company. Today, employers argue they need to impose TRAPs to recover the overhead of employee training. But making workers pay is nothing new. Some employers also try to recover hiring and recruiting costs from departing workers.
Pay to work
Critics contend that training is a business overhead cost and that making employees agree to repay training expenses is similar to requiring restrictive non-compete agreements (NCAs). But NCAs are now illegal in some states and will likely be forbidden everywhere because they interfere with the right to work.
Stay-or-pay clauses used to be limited to just a few industries and high-paying jobs, like airline pilots and software engineers, but are now applied to dog groomers, bank workers, nurses, roofers and truckers. Experts estimate that up to a third of all American workers are now subjected to TRAPs — and, in fact, TRAPs may have become a racket:
“Workers’ rights advocates say that, in many cases, stay-or-pay clauses no longer accurately reflect the company’s costs but instead appear to be inflated financial penalties designed to discourage quitting.”
Ending the stay or pay TRAP
Help may be on the way. It’s no accident that the insidious nature of “stay or pay” leads to comparisons to other questionable methods employers use to control workers.
“Regulators, governmental officials and politicians are starting to take notice of stay-or-pay clauses. The Federal Trade Commission’s proposed ban would include TRAPs that operate like de facto NCAs…Last June, the Consumer Financial Protection Bureau announced an investigation into ‘practices that leave workers indebted to employers,’ indicating that it may use its power as a consumer-debt watchdog to intervene in such cases.”
But the wheels of government turn so slowly that workers subjected to TRAPs continue to be hurt when employers penalize workers for quitting. For now, it’s up to you to avoid funding an employer’s overhead when you quit. Read all job offers, employee policy handbooks, and all associated documents carefully before accepting a new job.
How widespread are TRAPs? Have you ever reimbursed your employer for training because you quit too soon? Would you sign a job offer or contract that included a stay-or-pay clause?