Onboarding employees can be one of the most expensive items on a company’s balance sheet as firms spend big money hiring and training new staffers. Of course, this costly process has no guarantee of success: people hired yesterday can leave tomorrow as quickly as they arrived. To offset the costs of rapid turnover, some companies are inserting controversial clauses into employment contracts that require staffers to repay training fees if they quit. For example, Kate Fredericks signed such an agreement when she joined the cargo airline Ameriflight as a pilot in 2021. When she left the job later that year, the company sent her a bill for $20,000 since she quit before working for 18 months.
Afraid that Ameriflight would start sending collections agents to her home, Fredericks negotiated a payment plan of $250 per month for about seven years. “I was terrified. I didn’t want someone banging on my door,” said Fredericks. “Some [former employees] tried to ignore it and had collections scare the living daylights out of them.” She is now challenging the contract in court, arguing that the agreement she signed amounted to an “unlawful constraint of trade” that ultimately traps workers, stifles competition, and keeps wages down. According to critics, these “training repayment agreement provisions” (TRAPs) require employees to reimburse companies for supposed training costs if they leave before a certain time period.
In one case that gained national attention, a PetSmart dog groomer received a $5,000 “grooming academy” bill when she left the company after seven months. As more workers sue their former employers over these training fees, the Federal Trade Commission (FTC) has taken notice and included provisions against TRAPs in its proposed ban on noncompete clauses. Still, the FTC does not have the jurisdiction to address “unfair or deceptive practices” in the airline industry, which falls under the purview of the Department of Transportation. Advocacy groups recently sent a letter to the agency advising it to follow the FTC’s lead and ban TRAPs, but only time will tell if any of these guidelines will survive counter lawsuits from businesses.
- Why are some workers suing their former employers over training repayment fees?
- Do you think companies should be allowed to insert training repayment clauses in employee contracts? Why or why not?
Source: Dave Jamieson, “When This Pilot Quit Her Job, Her Employer Billed Her $20,000,” HuffPost, January 31, 2023.