More Workers Are Starting Their Jobs In Debt Under “Training Repayment Agreements”
A new study finds that more workers are starting their jobs in debt to their employers under Training Repayment Agreements. Under these agreements, workers who quit their jobs or are fired within a set time period are required to pay their employers money. Debt amounts can be upwards of $40,000.
A new study by Jonathan F. Harris, associate professor of law at Loyola Law School, finds that more workers are starting their jobs in debt to their employers under Training Repayment Agreements. Under these agreements, workers who quit their jobs or are fired within a set time period are required to pay their employers money, ostensibly, to offset the costs of training.
The debt amounts can be high. In Ohio, a roofing product sales company made their salespeople repay $42,000 if they left the job in three years or less, a training repayment agreement that was upheld by the court.
Among the workers who have been asked to sign training repayment agreements in order to get a job are police officers, salespeople, electrical workers, maintenance workers, firefighters and consultants.
Employers who use these agreements say they’re just trying to recoup the cost of training – but some employers may overstate training costs to discourage workers from quitting, or squeeze workers on their way out the door.
In an ongoing case in Illinois’ Northern District, former employees of Edward R. Jones are suing their employer over a training repayment agreement that required financial advisor trainees to repay $75,000 if they left the company for any reason within their first three years on the job. Trainees earned their FINRA Series 7 and Series 66 licenses – but in the study, Jonathan F. Harris points out the typical cost to take FINRA exam-prep classes from highly-regarded private companies is only about $1,000. The employees are alleging that they didn’t quit voluntarily, but were forced out of their jobs.
According to Harris, the growing popularity of training repayment agreements is a part of a trend of employers shifting the cost for training onto the employees, through TRAs, by offering reduced or no pay during training periods, or by expecting that workers will apply having already learned job-specific skills from post-high-school degrees.
When workers try to sue to overturn TRAs, it is often because after repaying their training costs, they were paid less than minimum wage: otherwise, existing federal and state laws generally allow TRAs.
On July 9, President Joe Biden signed an executive order that asked the Federal Trade Commission to ban or limit employees non-compete agreements, which stop workers from taking jobs with competitors. Although historically, non-compete agreements were used only for white collar executives, or others with access with to proprietary information, these non-compete agreements came under fire when employers started asking low-wage workers to sign these agreements too, even when those workers didn’t have access to any valuable trade secrets. In a statement on the executive order, the White House wrote, “Tens of millions of Americans—including those working in construction and retail—are required to sign non-compete agreements as a condition of getting a job, which makes it harder for them to switch to better-paying options.”
Matthew Johnson, a research scientist at the Duke University Sanford School of Public Policy, found that in states where non-compete agreements were common, workers were paid about 5% less in aggregate, ostensibly because they were less able to leave when another company offered them a higher salary.
But as Harris points out, TRAs may be even worse for workers than non-compete agreements: after all, non-compete agreements stop you from quitting and taking a job with a competitor, while a TRA may stop you from quitting for any reason at all.
The original article can be found at: Forbes (Business Category)
