Bosses in logistics, retail, and health care are using an old tactic to keep people stuck in miserable jobs and threaten to impose debt on them if they quit. Workers across the United States in fields ranging from nursing to trucking have been discouraged from leaving jobs they hate or can’t afford to keep because employers vow to charge them for training costs if they quit before an arbitrary deadline.
These threats are backed up by so-called Training Repayment Agreement Provisions. The practice has been likened by critics to indentured servitude and peonage — formerly common types of debt bondage in which a borrower was bound to perform labor for a creditor.
Recent criticisms of TRAPs by policymakers stem from class action litigation against PetSmart’s pet store chain, PetSmart, and reports on restrictive covenants from a watchdog group called The Watchdog Group. Student Borrower Protection Center. The Senate Banking Committee held hearings earlier this month examiningThe agreements and other forms employer-driven debt. The Consumer Financial Protection Bureau was also established in June. launched an investigationMany workers owing money to their bosses because of employment arrangements.
Two workers are facing threats of thousands of dollars in bills due to the enforcement TRAPs. BreAnn Scally the lead plaintiffPetSmart was part of a class action. She told lawmakers about the debt she owed. $5,500 to the company for a dog “Grooming Academy” that was initially advertised as free. Registered nurse Cassie Pennings testified about being stuck with $7,500, “more than six months’ rent,” after leaving one hospital job because she was appalled by staffing ratios during the COVID-19 pandemic and didn’t want to be complicit in neglecting patients.
Although they came from different industries and had different grievances, both described indifference from their managers. “Despite being one of the most profitable health care systems in the nation, my former employer responded to cries for help from the front line with breakfast burritos and free water bottles,” Pennings said. Scally recalled how one manager told her she could work her way out of debt simply by “upselling” or convincing customers to buy more pet grooming products and services. She claimed she sold $6,000 worth of products, but was still charged the full amount for the debt several months later.
The dollar value each company attached to the training cost appeared to have been drawn out of thin air. “I thought I was going to get important and valuable training, but it wasn’t anything like that,” Scally said. “I didn’t get any kind of license or accreditation or anything, and my actual training was only a few weeks.” Pennings also told lawmakers that she doubted the $7,500 price tag placed on the cost of her training regimen.
At a second hearing on September 13, one of Scally’s lawyers, David Seligman, told the Senate Banking Committee that TRAPs are used by managers to leave workers “stuck with low pay, dangerous conditions, abusive treatment, or work that does not allow them to advance professionally.” The chair of the committee, Ohio Democrat Sherrod Brown, was unimpressed with the managerial tactic.
“Last I checked, indentured servitude was illegal in the United States. But it looks like some enterprising companies are rebranding it, with these new employment contracts,” Senator Brown said. His office said Truthout that the lawmaker is currently “considering legislation” that would rein in the use of TRAPs by employers, and said he “will work with the [Consumer Financial Protection Bureau] to ensure that consumers are protected from predatory consumer products like TRAPs.”
Indentured servitude was established during the British colonial era to finance the travel of European migrants to North America. The travel was allowed to be paid for by wealthy individuals for many years. closely controlThey also abuse the people who made the journey. The United States technically prohibited indentured servitude, but the ratification and abolition chattel slavery enabled the United States to bring Chinese workers over by railroad companies. indentured servants in the postbellum 19th century for five-year contracts with terms that brought the workers “low wages and … substandard living conditions.”
“The law does not permit employers or others to provide a work opportunity in exchange for a worker’s promise to indenture themselves to their employer through debt,” Seligman said. “These sorts of work arrangements harken back to nineteenth century peonage used to subjugate former slaves, and they are precisely the kind of exploitation that our anti-trafficking and peonage laws were designed to prohibit.” Peonage was imposed on former slavesReconstruction and Jim Crow era in the south of the United States. Sharecropping arrangements and fines imposed by racist law enforcement.
Although there are critics of TRAPs’ legality, a legal analysis has been done published last yearThe courts generally uphold agreements in legal challenges brought under the Fair Labor Standards Act’s anti-kickback provisions, which established a federal minimum wage. However, the author of the study, Loyola Marymount associate law professor Jonathan F. Harris, said another type of legal challenge might prove more successful: courts could refuse to enforce TRAP contract language under the so-called unconscionability doctrine, a legal principle that allows judges to void agreements containing unreasonable terms dictated by a party “with superior bargaining power.” In 2000, the study noted, a federal judge in Manhattan nullified one employment agreement in the financial services industry, ruling that the language of the contract “approaches indentured servitude.”
Employers have used TRAPs since the 1990s. However, they were almost exclusively reserved for highly skilled workers like engineers and pilots. As markets became increasingly concentrated and union power was diminished by policymakers into the 21st century, bosses used their growing dominance to impose TRAPs on rank-and-file workers, such as “truckers, nurses, mechanics, electricians, salespeople, paramedics, flight attendants, bank workers, repairmen, and social workers,” as Harris’s study detailed. “While such jobs used to be middle class and highly unionized, many workers in these sectors now struggle financially, and unionization levels have dropped,” according to Harris.
Harris’ study noted that there is little evidence-based analysis of the agreements or their impact on labor market, but said that they are increasing in use and that the vast majority of them never face any kind of legal scrutiny. “For every [TRAP] that is the subject of a court opinion, tens of thousands remain unchallenged,” he noted. What empirical analysis has been done has shown bosses primarily using TRAPs for “employee immobility” — to obstruct workers from leaving jobs. Harris also found anecdotal evidence from the nursing sector, which showed the restrictive agreements mostly wielded by employers “unable or unwilling to compete on wages and other benefits.”
The Senate Banking Committee examined another type of employer-driven debt, payday advances. Seligman highlighted the case of Marriott workers in Philadelphia who became dependent on short-term loans from the company credit union because “scheduling practices made it difficult for them to earn consistent income without getting a second job.” Franchising agreements that misclassify workers as independent contractors can also leave low-wage earners heavily in debt to bosses because of franchising fees, he told the committee.
The Consumer Financial Protection Bureau investigation into employer-driven debt will be examining franchising agreements among other job arrangements that “involve deferred payment to the employer or an associated entity for employer mandated training, equipment, and other expenses.” The agency will also be looking at TRAPs, though it described the arrangements as “Training Repayment Agreements.” There’s also an ongoing bureau investigation of payday advances (so-called “earned wage access” products) which was launched in February.
Whatever the terms used and however the debt originated, employer-driven loans have not proliferated because workers “lack access to credit,” as Seligman told the banking committee, but because workers aren’t paid enough. “And far too many employers seek to shift onto their workers their own costs while undermining their workers’ bargaining power by making it costly for them to seek out jobs where they might be treated better or paid more,” he added.