Apr 14, 20238 min read

Training Repayment Agreement Provisions (TRAPs)

** If you or someone you know has entered a company sponsored CDL Training agreement that kept you from work somewhere better you should read this and take action before the deadline to make your comment HERE by Wednesday, April 19th at 11:59pm ET. If you have any questions or need help drafting a comment, please email desiree@realwomenintrucking.org right away. Here is a template to use to help you draft your comment (TRAP COMMENT TEMPLATE DOWNLOAD) **

A new and troubling trend is emerging in workplaces across the country: employers are holding workers hostage in low-paying and substandard working conditions through employer-driven debt. To lock workers into these debts, employers rely on restrictive employment covenants such as “training repayment agreement provisions” or TRAPs.

What is a TRAP?

Often buried deep inside workers’ employment contracts and used as a precondition to taking a job, TRAPs require workers who receive on-the-job training—often of dubious quality or necessity—to pay back the “cost” of this training to their employer if they leave their job before an arbitrary, fixed amount of time. These charges often come with additional costs through interest rates, attorney’s fees, and collection fees. Many employers also enforce TRAPS by withholding final paychecks. These TRAP debts create a debt that is likely to hang over workers’ heads for years if they do move on to another job.

Research shows that this power shift has also greatly benefitted employers: “employers can transfer the cost of training for a given job onto workers. Individuals who would once have acquired a significant portion of the skills needed for today’s jobs on their employer’s dime now must shoulder that burden themselves—a reality represented by the expansion of the distribution of debt burdens over time.” And it appears that some employers have gone further, developing and acquiring for-profit training centers and academies for potential and current employees.

Who is most harmed by TRAPs?

Many of the industries seeing a rise in TRAPs pay low wages and disproportionately hire women, immigrants, and Latina/o and Black employees.

Jim S. was “dead broke” when he saw an advertisement for a trucking school that promised a steady trucking career and a large signing bonus. A month after his training began at CRST Trucking, in which he described “brutal” working conditions that led to other driving trainees getting sick and his instructor quitting, Jim moved on to another job. Immediately after leaving, he began receiving calls from debt collection agencies trying to collect more than $6,000 on behalf of CRST.

How do TRAPs and employer-driven debt restrict worker mobility?

The use of TRAPs in low- to moderate-wage industries is a flagrantly unfair method of competition by employers to undermine worker bargaining power by keeping them trapped in their jobs through these de facto non-compete clauses. Where non-compete, agreements prevent a worker from seeking employment in an entire industry or geography, TRAPs require a departing worker to bear these costs when leaving for any reason, anywhere, not just because they are joining a rival company. Therefore, TRAPs can often be even more harmful than traditional non-compete agreements.

Millions of workers are likely bound by TRAPs. These include some of the most essential workers during the worst phases of the COVID-19 pandemic: nurses, retail workers, and truck drivers. Many of them could command better pay by going to another employer but feel trapped in their current jobs due to the looming threat of debt if they dare to leave. And that’s precisely the purpose: at least one trade association has counseled its members to consider TRAPs as a way to keep workers from leaving.

The result is bleak. Workers are being transformed into debtors and are trapped in their jobs because they do not earn enough to cover the cost of quitting. If left unchecked, TRAPs have the potential to leave workers buried in debt for taking a better opportunity or for having to quit a job to navigate personal hardship such as a family health crisis or a childcare shortage.

How many employers use TRAPs?

The SBPC estimates that major employers rely upon TRAPs in segments of the U.S. labor market that collectively employ more than one in three private-sector workers.

Which industries rely on TRAPs most heavily?

In the 1990s, when TRAPs began to appear in significant numbers, the contracts were mostly limited to higher-wage employees such as engineers, securities brokers, and airline pilots. This is no longer the case, as the use of TRAPs has exploded among workers in high demand sectors like computer programming, entry-level finance, health care, retail and hospitality, and transportation. A 2022 survey conducted by National Nurses United reported that almost 45 percent of responding new nurses with between one and five years of experience were bound by TRAPs, often with repayment amounts exceeding $10,000.

How do TRAPs affect wages and salaries?

There has only been a single empirical study conducted into the use of TRAPs, which found that the top reason for one firm’s use of these provisions was employee immobility. As noted by National Nurses United, limiting worker mobility in the healthcare sector through TRAPs has the potential to depress wages and wage growth. This is further reinforced by anecdotal evidence across additional industries, showing that TRAPs are most frequently used by less desirable employers who are unable, or unwilling, to compete with other employers offering higher wages and benefits:

Are these costs reasonable for the workers?

The training in question can range from preparation for a valuable and industry recognized credential to extremely basic and firm-specific orientations that offer no actual or transferable value to the worker. In many cases, however, the training is for the benefit of the employer rather than the employee. Although employers argue that these provisions are a useful way to recoup the cost of teaching useful skills to employees who may depart sooner than anticipated, the purported cost dramatically exceeds the actual value of the training. Take the case of CRST Trucking, who charged truck drivers $6,500 for their training if they departed early. In a class action lawsuit by former trucker drivers, it was discovered that CRST was only paying truck driving schools $1,400 to $2,500 per driver for this training.

Frequently, there is no connection between the costs that workers face under TRAPs and the cost of the training to the employer, even though it would be relatively easy for employers to account for the TRAP repayments.

What should the FTC do?

The FTC should completely ban the use of TRAPs, and other types of employer-driven debt, that accomplish the same outcome as traditional non-compete agreements through different means as de facto non-compete agreements.

Currently, the proposed rule seeks to ban TRAPs that “are not reasonably related to the cost of training.” Experience has shown that employers switch to functionally equivalent restraints when specific restrictions on labor mobility are banned, similar to a game of Whack-A-Mole. If this loophole remains, employers are sure to exploit it, leading workers to have to individually adjudicate every TRAP, a process that can last years, cost workers tens to hundreds of thousands of dollars, and create the same chilling effect on worker mobility as a traditional non-compete clause. Worse, as legal scholar Jonathan Harris wrote, “[a]n unenforceable TRAP coupled with a mandatory arbitration agreement or waiver of class arbitration for employment disputes, ubiquitous in today’s workplaces, might have an additional in terrorem effect on a worker contemplating a legal challenge to a TRAP.” The FTC correctly recognized the need for a blanket ban on the use of traditional non-compete agreements and should approach de facto non-compete agreements—such as TRAPs—the same way to prevent widespread abuses by employers seeking to evade the intent of this rule.

How have the courts handled TRAPs cases?

Courts across the country are struggling to adjudicate cases involving TRAPs, and the FTC rule could offer much needed clarification. But it is imperative that the FTC rule not only refer to TRAPs as “de facto non-competes,” but that it treat TRAPs the same as non-competes with a blanket ban. The courts have been inconsistent because there is no rule or law that is clear enough for them to follow and some of the existing causes of action used to challenge TRAPs are not a good fit. This leads to years of litigation that is just as expensive as it is time-consuming when there could be a rule on the books making it clear that TRAPs are banned along with non-competes.

For instance, judges often apply a reasonableness standard—similar to the existing reasonableness standard used for non-compete agreements in most states—to determine what TRAPs should be upheld. As with traditional non-compete agreements, this standard has led to confusing and unreliable precedent as well as frequent and overwhelming judgments against people who cannot afford to pay these unfair debts. By using this standard, courts are splitting hairs by trying to make TRAPs separate from non-competes when they both function in the same harmful wa

ys and accomplish the same goals of inhibiting job movement. TRAPs are being wrongfully upheld as “voluntarily accepted” loan agreements or liquidated damages, when in fact, they are used to prevent a person from freely navigating the job market—to advance their career or for any other reason. Due to similar judicial inconsistencies, the FTC determined that non-compete agreements should be completely banned. To prevent TRAPs from being used as workarounds to non-competes, the FTC’s proposed rule must also completely ban TRAPs.

Beyond the FTC, can states do anything about TRAPs?

Some states have begun to crackdown on this abusive practice: Connecticut has long prohibited TRAPs, and other state lawmakers have recently begun to follow their lead. During the pandemic, California lawmakers passed legislation that bars hospitals from using TRAPs, and Colorado recently prohibited the use of TRAPs for standard on-the-job training, prompting the largest hospital chain in the state to stop using TRAPs and instead retain healthcare workers through better pay and career opportunities, and reduced workloads.

The FTC and state policymakers should follow this lead and move to prohibit the use of TRAPs between employers, employees, and prospective employees. Even if the FTC creates a rule banning non-compete clauses and TRAPs, there are industries outside of their jurisdiction that have been found to use these contract terms, including: airlines, banks, and not-for-profit hospitals. This creates a clear need for state lawmakers to act in order to protect workers from these abusive practices.

TRAPs sound bad, but are there any other examples of these kinds of employer-driven debts that act as de facto non-compete agreements?

Yes. Here are just a few examples of how employers are using debt as a tool of coercion to prevent workers from departing, many of which act as de facto non-compete agreements and enable employers to engage in unfair methods of competition.

“Stay-or-Pay” Contracts

Much like TRAPs, "Stay-or-Pay" employment contracts are an abusive form of employer-driven debt and act as a de facto non-compete agreement. They require departing employees to compensate their employer for every day that they “fail to provide services” and pay their replacements salary. One egregious example of this is Concentra Health, which requires employees to provide 120 days’ notice when quitting or pay a hefty fee, equivalent to their salary for the remainder of that four-month window.

Liquidated Damages or Other Damages Provisions

Some employers may require employees to pay either a flat fee (called “liquidated damages”) or an indefinite amount of money to repay what the employer characterizes as expenses related to employee training, finding and training a replacement employee, or for vague harms like “loss of goodwill.” These damages provisions could violate laws against using liquidated damages clauses as penalties, laws against making employees pay for the employer’s cost of doing business, or even laws against forced labor, as nurses have alleged in cases against staffing agencies like Health Carousel.

Income-Share Agreements

Income-Share Agreements (ISAs) are financing products that require students to pledge a portion of their future income in exchange for money to pay for college. ISAs have been touted by venture capitalists and Silicon Valley as a solution to the student debt crisis, but these products pose serious risks to students and could violate a number of federal and state laws.

Equipment Debt

Employers generally have to pay for their own costs of doing business, and that includes providing employees with the tools they need in order to do their jobs. But some employers make employees pay for their own equipment, or even promise employees unfair loans to purchase equipment that the employers should have been paying for in the first place.

As employers increasingly make employer-driven debt a precondition of employment, the chilling effect it has on individual workers’ ability to leave their jobs will continue to cement and exacerbate the industry-wide power imbalances between labor and management across entire industries.

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Training Repayment Agreement Provisions (TRAPs)

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