Reimbursing Employers? States Restrict “Stay-or-Pay” Provisions for Departing Employees

What Is a “Stay-or-Pay” Provision?

A “stay-or-pay” provision, also known as a training repayment agreement provision (TRAP), is a portion of an employment contract that requires employees to repay certain expenses if they leave their employment before a designated time. Repayment may be required for a variety of expenses including relocation expenses, education, training, and more. In other words, employees can either stay in their current employment or pay if they wish to leave.

How Are States Reacting to These Provisions?

Several states have enacted restrictions or an outright prohibition on “stay-or-pay” provisions. For example, New York recently passed the Trapped at Work Act, which bans any agreement that requires workers to repay their employer upon resignation. Notably, recently proposed amendments may alter the nature of the Act. But the definition of worker currently includes:

• employees;
• independent contractors;
• interns;
• externs; and
• volunteers.

Despite the broad scope of the Act’s definitions, it excludes certain repayment requirements from its prohibition, including monetary advances offered by the employer (unless for training purposes), property leased or sold, terms or conditions of sabbatical, and collective bargaining agreements. California recently enacted a similar restriction and Colorado, Wyoming, and Connecticut also impose “stay-or-pay” restrictions.   

Impact on Employees Across the US

It’s always good to know the rights in your home state. The consequences of an employer implementing a “stay-or-pay” provision vary based on the state you  reside in or are employed in. Employers in New York may not face actions for Trapped at Work Act violations but may be liable to pay attorney fees for employes challenginff the TRAP clause. On the other side, some states like Colorado allows an employee to monetarily recover if their employer violates the “stay-or-pay” restrictions imposed by the state. Employees should research the “stay-or-pay” restrictions in their state to ensure their employer is abiding by their state’s laws.

This happened to me!

If you or someone you know have been subject to a “stay-or-pay” provision or any TRAP clause implemented by your employer and are concerned that your bosses have violated the “stay-or-pay” restrictions in your state, let us know!

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