The “stay or pay” clause, which requires you to pay to quit a job

The imposition of a financial penalty if a contract is breached, as in the case of Vidal, has a long history in contract law but is relatively new in employment contracts. In the early 1970s, the US Court of Appeals for the First Circuit noted that companies providing “specialized training” to their employees could seek reimbursement “if the employee leaves before the employer receives any benefit.” . But the court emphasized that the punishment must be closely tied to the cost of the training. “An employer may not require a former employee to make payments unrelated to the employer’s damages,” the judges wrote, “simply as a penalty to discourage or penalize switching.”

Seligman told me that when he saw his firm’s first stay-or-pay case around 2016, the concept of the worker as debtor was “extremely disturbing.” Vidal’s case was unusual because it was an unspecified opt-out fee rather than a fixed amount tied to tuition costs. A typical stay-or-pay clause is called a training reimbursement agreement provision (TRAP), which states that the cost of on-the-job training will be borne by the employee. If a company is paying for a transferable credential, such as an MBA or a master’s degree in computer programming, it may make sense to require the employee to stay for a certain period of time. But too often the training is little more than an orientation and doesn’t provide transferable credentials, according to many workers I spoke with in the course of reporting this article.

While the spread of TRAPs is difficult to track, a 2022 letter from the National Labor Law Project points the finger at private equity firms. Not only do private equity firms tend to replicate contractual terms across their suite of businesses, but they increasingly buy companies that provide employee training, giving them an added incentive to use TRAPs.

“Not a month goes by where I don’t hear about a new industry using TRAPs,” says Jonathan Harris, a law professor at Loyola Marymount in Los Angeles who studies these agreements. However, Harris says, it’s hard to know how many workers are covered by these contracts because labor contracts are often private. Based on his research, Harris believes it’s safe to assume that in any industry where there’s been a lawsuit involving one worker, stay-or-pay clauses are in the contracts of thousands of others because of the way businesses are tend to copy each other. Unaffiliated hospitals have used almost verbatim language in their contracts, according to Harris, and it’s easy enough to find, say, a blog for roofing company owners with tips on how to implement TRAPs. Because stay-or-pay clauses are so common in industries that employ about a third of the entire American workforce — health care, transportation and technology — Harris estimates that millions of people could be subject to them.

Kate Fredericks, a A 38-year-old pilot from Massachusetts, he knows well the problems with TRAPs. After years of working as a teacher, she decided to change careers and follow her father into the airline industry. In early 2020, she received an offer to be a passenger pilot, but the pandemic grounded air travel and her offer evaporated. She had to wait a while, but eventually got an offer from Ameriflight, a Texas-based cargo carrier. Ameriflight is a cargo feeder airline; while UPS and FedEx have routes around the country, they still rely on smaller carriers to fly connecting routes from, say, Lansing to Detroit. Feeder airline pilots are the invisible backbone of the package delivery chain, often operating decommissioned passenger aircraft under contract. Fredericks moved to Puerto Rico and began working at Ameriflight. She signed a contract that required her to pay back $20,000 in training if she left within 18 months, training that Ameriflight must provide by law to remain in operation. Many carriers do not charge pilots for this training. Fredericks thought the pandemic would last at least three years, so it probably wouldn’t matter. She signed.

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