---LAST UPDATED: November 14, 2025---

STAY-OR-PAY STATE LEGISLATIVE TOOLKIT

No one should have to worry about facing a crushing financial penalty just because they had the audacity to quit their job. But across the country, millions of workers are finding themselves in this exact situation.

Firms ranging from hospitals to roofing contractors are harnessing a predatory tool known as “Stay-or-Pay” contracts in an attempt to evade state and federal worker protections, including state-level bans on non-compete agreements. Stay-or-pay contracts take many forms. One of the most common types of stay-or-pay contracts are Training Repayment Agreement Provisions (better known as TRAPs). Stay-or-pay contracts are forced on workers as a condition of employment, allowing corporations to use the threat of debt collection or litigation to lock workers in place, limiting workers’ mobility and bargaining power. When they do leave, workers are hit with a crushing financial penalty. For the vast majority of workers, the threat of debt, or even debt collection litigation brought by employers, becomes a form of modern-day indentured servitude—keeping them trapped in jobs with low wages and bad working conditions.

But momentum is growing among state lawmakers and regulators to crack down on these practices. The goal of this legislative toolkit is to provide state advocacy organizations and policymakers with the tools and information needed to protect workers from these nefarious employment contracts, and share important lessons learned from previous legislative efforts.

BACKGROUND

Use of these functional non-competes has increased rapidly, serving as substitutes for traditional non-competes, which have come under growing scrutiny from federal government agencies and state lawmakers. TRAPs are often presented as a condition of employment and require workers who receive on-the-job training—regardless of its quality or necessity—to pay back the supposed “cost” of this training to their employer when they leave their job. In other types of stay-or-pay contracts, employers have demanded departing employees pay them for not providing a 4-month notice of resignation, the salary of their replacement, liquidated damages, or even “lost profits.”

Research has found that nearly 1 in 12 workers are bound by TRAPs. This research shows that the use of TRAPs has become increasingly prevalent in certain industries, including aviation, healthcare, long-haul truck driving, and retail. And legal scholars have expressed concern that TRAPs may be even more effective at limiting or blocking workers from leaving their jobs than traditional non-competes, particularly for low-wage workers who can’t afford to pay their employer a substantial sum to quit. While traditional non-competes aim to limit workers from departing for a competitor, TRAPs and stay-or-pay contracts may be enforced against a worker who departs for any reason, including to navigate personal hardship such as a family health crisis or a childcare shortage.

There is both an opportunity and a dire need for state lawmakers to take action against these practices. Efforts to pass these laws come amidst an alarming rollback of federal efforts intended to protect workers from these exploitative employment contracts. In July 2025, President Trump revoked a Biden-era executive order promoting competition. By revoking this guidance, it gave government agencies the green light to abandon efforts to protect workers from a slew of anticompetitive practices, like non-competes and TRAPs. In a matter of weeks, numerous agencies did just that, rescinding guidance memos on how it is unlawful to impose stay-or-pay contracts and TRAPs on workers, withdrawing from a court case to fight for rules that prohibited these types of contracts, and quietly settling or removing themselves from cases initiated by the Biden Administration.

However, states can and must act to protect workers. Even if federal protections had remained, they were often limited in their jurisdictions, allowing entire industries to continue to lock workers in their jobs through the threat of debt. States should build on the Biden Administration’s work  and codify these workplace protections—namely, by prohibiting these practices—and vigorously enforce these laws where they exist.

MODEL LEGISLATION

You can find our model legislative template here. The key points of this bill are:

• Defining “stay-or-pay”: The bill broadly covers any debt owed by a worker to an employer if that worker seeks to leave his or her employment. Taking this approach, rather than focusing narrowly on specific kinds of debts such as TRAPs, ensures that employers cannot circumvent these protections by styling the debt in a different manner.
  
• Who is covered: The bill covers both employers and workers, and broadly defines both groups. These definitions are likely more comprehensive than existing state law definitions for “employer,” “employee,” or “worker,” and should be adopted as drafted, rather than substituting with existing definitions. For example, if the bill’s protections only apply to traditional W2 employees, employers may shift their workforce to rely more upon independent contractors as a strategy to evade coverage.
  
• Exemptions: The bill exempts certain repayment arrangements on the basis that repayment in certain instances of employer-fronted funds may be appropriate. These instances were identified during bill negotiations by industry and include signing bonuses, tuition payments for accredited credentials, and certain apprenticeship programs. The bill would allow repayment obligations in these instances and also includes worker protections, such as ensuring that any repayment is proportional to the time the worker was employed.
  
• City and state enforcement: The bill provides for broad public enforcement and for concurrent authority across several offices, including state attorneys general and state labor commissioners, labor standards or worker protection offices of county and municipal governments, and county and city prosecutors. Policymakers should discuss enforcement with their state’s labor commissioners to ensure their authorities are properly reflected in the bill and that any capacity and fiscal concerns are addressed.
  
• Private right of action: Private rights of action—or the ability for private individuals who have been harmed to enforce their own rights in court—are critical for any worker protection to be meaningfully enforced. Although labor commissioners and attorneys general are powerful public enforcement offices, they have limited staffing and budgets, which practically reduces their ability to protect all workers. Enabling affected workers to represent themselves and similarly situated workers complements public enforcement powers and ensures greater compliance. The bill’s private right of action includes a fee-shifting provision, which requires any employer who is found by a court to have violated the law to pay for the worker’s litigation costs and attorneys fees. Fee shifting is an important tool that allows low-income workers to find legal representation, since the lawyers can be confident that they will be paid by the losing side. This also incentivizes workers and lawyers only to bring meritorious cases.

COMMON QUESTIONS AND CONCERNS

As we have advanced legislation addressing these bills, here are some common questions and concerns, and how we have addressed them.

• Will banning the use of stay-or-pay contracts affect student loan relief programs, such as Public Service Loan Forgiveness or Income-Driven Repayment?
  No. These types of student debt relief programs apply to federal student loans, not loans originated by an employer for on-the-job training. Federal student loans are not affected by bills that ban stay-or-pay contract provisions. Additionally, such employer-provided programs generally only provide a benefit for work performed in real time, leaving nothing to be clawed back. The model language we encourage advocates and lawmakers to use also clarifies that federal, state, and local student debt relief programs are not affected by these bills.
  
• Will banning stay-or-pay contracts prevent employers from offering tuition reimbursement to enroll in career advancement opportunities not related to their current job? (For example, a hospital offering tuition reimbursement for an employee to attend medical school to become a registered nurse, or a law firm offering tuition reimbursement to a paralegal for law school)
  No. In the model language that we have crafted, we clarify that these programs will not be affected by these laws, so long as the tuition reimbursement meets the following criteria: (1) it reimburses a degree or certification offered by a third-party institution that has satisfied all applicable accreditation and state authorization requirements to operate, (2) is not a requirement for a worker’s current job, and (3) is transferable and useful for employment beyond the worker’s current employer. Further, if these benefits require repayment during any required employment period, the repayment must be proportional to the total repayment amount and length of the required employment period.
  
• Will banning stay-or-pay contracts negatively affect building trades union apprenticeship programs?
  No. We do not consider repayment agreements associated with Registered Apprenticeship Programs (RAPs), which are already subject to regulation under the National Apprenticeship Act of 1937, to constitute “stay-or-pay” contracts. Many RAP scholarship or education loan agreements do not indebt apprenticeships to one specific employer but rather to a third-party entity, and do not compel a worker to remain employed by a particular employer but rather allow employment with a multitude of employers. The third-parties to which apprentices owe debt are often called a “joint labor-management apprenticeship program” or “joint apprenticeship training committee.” Joint labor-management programs account for 97 percent of all active construction apprentices in Illinois, 94 percent in Indiana, 93 percent in Minnesota, 82 percent in Ohio, 82 percent in Wisconsin, and 79 percent in Kentucky.
  
  We believe that this means these programs should not be impacted by the sample legislation, but in some instances we have supported amendments that explicitly say the bill will not apply to a contract related to enrollment in a joint labor-management apprenticeship program.

• Will this cause employers to no longer train employees?
  No. Although the bill would prohibit employers from compelling former workers to repay such alleged training, the bill does not prohibit employers from offering meaningful on-the-job training. Some employers may claim that this will require them to stop recruiting and training workers, but there is no factual support for this claim. To the contrary, Connecticut prohibited the use of these contracts in 1985 and it has not led to a reduction in the recruitment, retention, quality, or competence of its workforce.

LEGISLATIVE TRACKER (2025)

Bills have been introduced to prohibit the use of TRAPs and stay-or-pay contracts from coast to coast. This legislative tracker contains bills that have been introduced since 2020 to ban stay-or-pay contracts, and will be continually updated as new bills are filed and passed into law.

FACTS AND FIGURES

The use of TRAPs has exploded among workers in high-demand sectors like computer programming, entry-level finance, health care, retail and hospitality, and transportation, and can now be found in nearly every industry in America.

• Research has found that nearly 1 in 12 workers are bound by TRAPs. This is an increase from 4.1 percent of workers having been bound by TRAPs in 2014, to 8.7 percent in 2020.
  
• Protect Borrowers estimates that major employers rely upon TRAPs in segments of the U.S. labor market that collectively employ more than one in three private-sector workers.
  
• A 2022 survey conducted by National Nurses United reported that almost 45 percent of new nurses with between one and five years of experience were bound by TRAPs, often with repayment amounts exceeding $10,000.

RESOURCES AND INFORMATION

Academic research into TRAPs and stay-or-pay contracts

• This article published in the Alabama Law Review provides one of the most thorough legal reviews of TRAPs and other employer-driven debt tools: Unconscionability in Contracting for Worker Training

• This article published in the Northwestern University Law Review highlights how the use of TRAPs has grown as states and localities have banned non-compete agreements: The New Noncompete: The Training Repayment Agreement Provision (TRAP) As A Scheme To Retain Workers Through Debt

• This article published on ProMarket offers first empirical evidence of the growing use of TRAPs: First Evidence on the Use of Training Repayment Agreements in the US Labor Force

Advocacy tools and resources

• This American Economic Liberties Project memorandum provides model legislation and relevant context for state lawmakers seeking to protect workers, small businesses, and consumers from the harmful effects of non-compete agreements and more: Better Wages and Working Conditions: How States Should Tackle Noncompete Agreements, “TRAPs,” and Other Restraints On Worker Mobility

• This National Nurses United article covers how TRAPs and stay-or-pay contracts harm healthcare professionals, with findings from a groundbreaking membership survey into these contracts: Caught in a TRAP

• This foundational report by the Student Borrower Protection Center (now known as Protect Borrowers) covers the growing use of TRAPs, closely examining their rise in retail, healthcare, and transportation industries: Trapped at Work: How Big Business Uses Student Debt to Restrict Worker Mobility

Research and action from federal agencies

• This Consumer Financial Protection Bureau report highlights the risks that employer-driven debt poses to workers and how it can impede worker mobility, particularly when it comes to obtaining higher wages: Consumer risks posed by employer-driven debt

• The Federal Trade Commission proposed a final rule, currently not in effect due to legal challenges, that would have prohibited nearly all TRAPs and abusive stay-or-pay contracts that effectively prevent a worker from seeking or accepting other work, or starting a business after the employment: FTC Announces Rule Banning Noncompetes

• This National Labor Relations Board now-rescinded guidance memo outlines why most stay-or-pay contracts are likely unlawful under federal labor law: Former General Counsel Abruzzo Issues Memo on Seeking Remedies for Non-Compete and Stay-or-Pay Provisions

• The U.S. Department of Labor has taken action to protect workers from both TRAPs and stay-or-pay contracts, such as the following:

• The former Solicitor of Labor highlighted how stay-or-pay contracts could be unlawful under federal labor law: Enforcement Report: Coercive Contractual Provisions
• Department of Labor Seeks Court Order To End It Staffing Agency Practices That Exploit Workers Through A System Akin To Modern-Day Indentured Servitude
• Department Of Labor Seeks Court Order To Stop Brooklyn Staffing Agency From Demanding Employees Stay 3 Years Or Repay Wages

EXAMPLE SUPPORT AND OPPOSITION LETTERS/TESTIMONY

• Advocates working to ban TRAPs and stay-or-pay contracts have developed several great resources and templates for letters of support and testimony, such as this New York coalition letter.

• This folder contains additional examples of letters and testimony from both advocates and opponents to legislation banning TRAPs and stay-or-pay contracts.

In most states, legislation that would ban the use of TRAPs and stay-or-pay contracts is supported by labor unions, employment lawyers, antimonopoly organizations, and consumer and worker advocates. Similarly, we have found consistent opposition from hospital and trucking associations. These industries often rely on TRAPs and stay-or-pay contracts to retain their workforce, rather than competing for workers with higher wages and benefits. These industries and local Chambers of Commerce also often lobby state legislatures to carve out their industries from new protections.

TRAPs and Stay-or-Pay Contracts in the News

The following stories highlight how TRAPs and stay-or-pay contracts have been used to harm workers.

• A PetSmart Dog Groomer Quit Her Job. They Billed Her Thousands Of Dollars For Training. (Huffington Post)
• When This Pilot Quit Her Job, Her Employer Billed Her $20,000 (Huffington Post)
• More U.S. companies charging employees for job training if they quit (Reuters)
• The Stay-or-Pay Clause That Demands You Pay to Quit Your Job (New York Times)
• Beware the Contract Clause Loading US Workers With Debt (Wired)
• How corporations are trapping employees – what we can do to stop them (Penn Live; an opinion piece by State Reps. Tarik Khan, Sara Innamorato, Donna Bullock and Roni Green)

www.protectborrowers.org