Making your Employees Pay for Their Training? Not So Fast…
Training repayment agreements (TRAs) have become the latest target of Biden Administration. TRAs are an employment contract where employers cover the cost for an employee to receive work-related training in exchange for the employee’s continued employment. If the employee leaves the company within a certain time period, the employee must reimburse the employer for the training costs. Now, the NLRB, FTC, and CFBP have set their sights on banning TRAs.
On September 1, 2023, Region 9 of the National Labor Relations Board (NLRB) lodged a complaint against an employer enforcing TRAs against two union-free employees. The TRA detailed the initial and ongoing training costs and required employees departing within the first 12 months of employment to reimburse the company for training costs. The complaint asserted the employer sought repayments of $50,000 and $60,000 from the respective employees. Additionally, the complaint identified other clauses in the agreement, such as confidentiality, non-disparagement, and non-compete provisions, as unlawful.
In its press release, the Regional Director of Region 9 explained how these provisions impede employees’ rights under Section 7 of the NLRA by limiting their job mobility. This stance was supported by a memorandum from the NLRB General Counsel Jennifer A. Abruzzo, asserting that non-compete agreements generally violate the NLRA. According to Abruzzo, protecting training investments should involve less restrictive methods, like offering longevity bonuses.
Meanwhile, at the Federal Trade Commission (FTC), a new rule was proposed to ban certain TRAs. The proposed rule takes aim at traditional non-compete clauses and “de facto non-compete clauses,” including some TRAs that hinder workers from seeking or accepting new employment after leaving their current job. The FTC believes these clauses reduce wages for both affected and unaffected workers by limiting job mobility and competition.
As if TRAs were not facing enough heat, the Consumer Financial Protection Bureau (CFPB) released a report pinpointing risks associated with “employer-driven debt,” which includes TRAs. The report highlighted that TRAs, when enforced through unequal bargaining power, impose substantial risks to employees.
Beyond all this, some states have either passed or are contemplating legislation that either restricts or eliminates TRAs. Given this mounting legal scrutiny, employers should continuously evaluate the viability and terms of TRAs and their alternatives to avoid legal challenges.
Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at email@example.com or 203.454.0560