By Chris Hicks | February 21, 2025
The Acting National Labor Relations Board (NLRB) General Counsel released the Trump Administration’s first set of agency priorities in a memo last Friday. The memo rescinded key labor protections for workers, including directing NLRB offices nationwide to no longer prosecute non-compete agreements, training repayment agreement provisions, or other types of stay-or-pay contracts. This major rollback of federal worker protections from the Biden-era NLRB poses a threat to workers nationwide, and creates a void that state lawmakers and regulators must fill.
Stay-or-Pay: What is a TRAP?
Stay-or-pay contracts work by charging departing workers a fee for quitting. The most common type of stay-or-pay contract is a Training Repayment Agreement Provision (also known as a TRAP). TRAPs and other types of stay-or-pay contracts are often 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 their mobility and bargaining power, and leveraging crushing financial penalties when a worker does dare to leave.
TRAPs gained national attention in July 2022 when a former PetSmart groomer filed a groundbreaking lawsuit against the company for its use of TRAPs. Her case alleged that the company engaged in a scheme to trap trainee pet groomers in their low-wage jobs by levying thousands of dollars in abusive and unenforceable debts against them. In the months that followed, additional workers stood up against the use of TRAPs in their workplace and filed lawsuits to challenge the practice. In response to these workers bravely putting the spotlight on this issue, former NLRB General Counsel Abruzzo issued a memo explaining that they violated federal worker protections because of their “serious potential for suppressing union organizing and other concerted activity for mutual aid or protection, including by impairing job mobility.”
Uncertainty Looms Over Federal Protections.
Other government agencies also took notice of the growing use of TRAPs and the threat they posed to workers. In response, the Biden Administration mobilized a whole-of-government response to the growing issue of stay-or-pay contracts and TRAPs:
- The U.S. Department of Labor sued Smoothstack, an IT staffing agency, for trapping employees in their jobs by demanding they pay up to $30,000 if they left the company before completing 4,000 hours—about two years—of billable work, causing some employees to earn less than the federal minimum wage, a violation of the Fair Labor Standards Acts. The Solicitor of Labor further outlined this position in their annual 2024 enforcement report.
- The U.S. Department of Justice Antitrust Division and Federal Trade Commission (FTC) highlighted TRAPs in their January 2025 antitrust guidelines as an example of a business practice affecting workers that would violate the antitrust laws.
- The FTC defined TRAPs and other stay-or-pay contracts as a type of de facto non-compete in their final rule prohibiting the use of non-competes, which is currently being blocked by federal courts, because of how they unfairly limit competition.
- The Consumer Financial Protection Bureau issued a report highlighting how TRAPs and other types of employer-driven debt could violate consumer protections.
Now, the fate of these federal protections are in grave danger as the second Trump Administration has begun to implement its blatantly anti-worker agenda. State and local policymakers have an opportunity and responsibility to stand in the gap and protect workers in their states.
State Lawmakers Must Protect Workers from Debt TRAPs.
Given the elimination and/or uncertainty of existing federal protections, states and cities need to do more to protect workers from the growing use of stay-or-pay contracts. But even if all of the federal protections hold, there is still more that can be done to protect workers. For example, even if the FTC’s rule banning non-competes were to go into effect today, many of the industries that have most notably abused TRAPs fall outside of their jurisdiction, such as aviation and trucking.
Last year, the Student Borrower Protection Center (SBPC) released a legislative toolkit for state lawmakers and advocates. It contains sample legislation for banning stay-or-pay contracts and TRAPs, examples of support letters and talking points, and resources and research to help ensure that workers most likely to be affected by these contracts are protected. State lawmakers can pass new protections for workers that clearly protect workers in their states, regardless of their occupation. The toolkit was informed by efforts to ban TRAPs in key states, including California, Maine, and New York, and can be used to enact similar protections in states across the country. SBPC and the National Employment Law Project also published a paper series highlighting how state and local regulators can use existing consumer, worker, and antitrust protections to challenge TRAPs.
If left unchecked, TRAPs and other stay-or-pay contracts have the potential to leave workers buried in debt just for taking a better opportunity or for having to quit a job to navigate personal hardship. Lawmakers and regulators at all levels should build on the actions of the federal regulators, and mobilize to protect workers and honest businesses by driving the use of TRAPs and other stay-or-pay contracts out of the economy.
###
Chris Hicks is a Senior Policy Advisor at the Student Borrower Protection Center. His work focuses on the intersection of consumer and labor protections.
Download the state toolkit here: https://protectborrowers.org/SBPC-TRAPs-State-Legislative-Toolkit
Be sure to visit the TRAPs page to learn more about our work!