They quit their jobs. Their ex-employers sued them for training costs

DREW Lakey quit her job as a physician assistant at the Skin and Cancer Institute in Delano, California, in November 2022. She gave four months’ notice.

In late August, her former employer sued her, claiming she owed the company more than US$138,000. The Skin and Cancer Institute was trying to make her repay US$38,000 in training costs and more than US$100,000 for “loss of business” caused by the company’s inability to transfer Lakey’s responsibilities to someone new.

Lakey had signed a training repayment agreement, or TRA, when she was hired. The contracts require workers to pay back training costs if they leave their jobs before the end of a certain period. The agreements are frequently presented late in the hiring process as a take-it-or-leave-it provision: no TRA, no job.

Lakey’s contract stated she would receive US$50,000 worth of on-the-job training, a sum she’d be required to pay back on a pro-rated basis if she quit before 2025. The company didn’t explain the figure, which is more than the average cost of tuition for a year of physician assistant school. But, in a complaint, the Skin and Cancer Institute said Lakey had agreed to the TRA because it was providing her with a “high value” training.

The numbers didn’t make sense to her, but Lakey said she hadn’t seen the training repayment provision as a big risk at the time. “I thought there was nothing that could happen that would make me want to leave the contract early,” she added.

At the start of her job, Lakey, then 26, went through a three-month training period that involved shadowing another physician assistant while earning a reduced salary. Not long after she started, Lakey realised she wanted to leave but was afraid if she quit that she would be on the hook for tens of thousands of dollars. She quit anyway after deciding the company wasn’t a good fit.

The Skin and Cancer Institute did not respond to multiple requests for comment.

Nearly 10 per cent of workers who participated in a 2020 study by the Survey Research Institute at Cornell University reported being covered by a TRA. The arrangements are especially common in the nursing field and the trucking industry; one survey by National Nurses United found that nearly 40 per cent of nurses who had joined the profession in the last decade had been subject to the practice.

Ashley Tremain, an employment lawyer in Texas, said she noticed the practice take off about five or six years ago, and she now hears from workers about TRAs a few times a month.

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“They’re just becoming ubiquitous,” she added, “as people are trying to find creative ways to move around noncompete restrictions.” These curbs are gaining traction at the state and federal levels.

Tremain tends to hear from people after they’ve quit their jobs and received a letter from their former employer stating that they owe money for training. The most common dollar value she sees listed is US$20,000. Enforcement can seem random at times, and Tremain said some employers seemed to send a relatively small proportion of cases to court or to debt collectors. “It’s really an enormous amount of power that the employer holds in that situation,” she noted.

Employers see TRAs as a way to improve retention and prevent paying for training employees who then leave soon after.

Dan Pyne, a lawyer with Hopkins & Carley, a law firm in Silicon Valley, who has written TRAs and represented employers enforcing TRA contracts, said companies who came to him tended to fall into two categories: one group is made up of employers looking to shift some of the costs of their operations to employees, which is not legal in California. The other group is employers looking to help employees gain new skills that will serve them later on in their careers. This second type of TRA is more legally enforceable.

“When the training is required by the employer, that is the employer’s cost of doing business, and they can’t force the employee to bear that cost or to reimburse that cost,” Pyne said. “But when the employee is going through the training voluntarily, primarily for their own benefit, in those situations, as a rule, the repayment obligation would be enforceable and would be legal.”

But regulators have begun to take action on the legality of TRAs. In the last year, the Biden administration has moved to limit the agreements. The Federal Trade Commission has proposed a rule that would ban most noncompete clauses, including many TRAs. In July, the Consumer Financial Protection Bureau released the findings of a year-long study on employer-driven debt, saying it “poses the risk of suppressing wages and forcing workers to stay in jobs they do not want” and that “trainings may have greatly inflated valuations”.

In some cases, on-the-job training covered by a training repayment agreement does result in a certification or provide employees with skills that are transferable to another job. Under the Fair Labour Standards Act, employers can’t require employees to bear expenses that are primarily for the benefit of the employers. It is legal, for example, for a management consulting firm to pay for an employee to complete an MBA degree and require the worker to return to the company upon graduation; the employee can take the degree along when leaving, and it can help find more work.

Rachel Dempsey, a lawyer for Towards Justice, a non-profit law firm, said that was different from a practice at PetSmart, which she said had tried to recoup training costs from employees at its in-house grooming academy. No state requires pet spa technicians to obtain licences. Dempsey’s firm sued PetSmart last year.

“I feel like we have caught the problem, and we’re in a moment where we can fix it, and I hope we can take those next steps,” said Chris Hicks, a senior policy adviser for the Student Borrower Protection Center, a non-profit. “But it will take multiple arms of the federal government and state governments cracking down on these problems, and it’s going to take coordination between all of the above.” NYTIMES