Notes from Convening on Workers, TRAPs, and the Economy

AG Bonta opened our conference, reaffirming California’s commitment to preventing unfair practices across the economy, including the unlawful use of Training Repayment Agreement Provisions (TRAPs). As AG Bonta described, TRAPs harm workers, consumers, and competition—consumer and worker protection laws need to work hand-in-hand to effectively protect workers from abuse. So, this year, the California Department of Justice issued a legal alert warning employers that TRAPs may violate state labor and consumer protection laws—just one way California is restoring power back to where it belongs: the people!

Watch a recording of his remarks here.

• Ellie Blume, California Attorney General’s Office
• Carmen Comsti, California Nurses Association
• Rachel Dempsey, Towards Justice

Moderated by Chris Hicks, Student Borrower Protection Center

Employers nationwide are leveraging debt tied to worker training—a form of shadow student debt—to trap workers in unfair employment contracts and substandard working conditions. In particular, a growing number of industries and employers are using bait-and-switch tactics to force workers to take on debt through TRAPs.In this panel, experts laid out the legal, policy, and economic landscape that has allowed this practice to flourish.

• Seth Frotman, Consumer Financial Protection Bureau
• Martha Fulford, Office of the Colorado Attorney General
• David Seligman, Towards Justice
• Persis Yu, Student Borrower Protection Center

Moderated by Terri Gerstein, NYU Wagner Labor Initiative

TRAPs affect workers and turn them into consumers, so both consumer and labor law need to, and should be, creatively leveraged together. Experts from in and out of government agreed that consumer law is a key tool to protect workers from employer-driven debt—when employers become creditors, workers have the right to fair treatment in the marketplace. We should also be committed to a path forward that doesn’t rely on better disclosures alone: we need to avoid inadvertently legitimizing stay-or-pay contracts, simply because we fought to make them transparent to employees.

• Winston Berkman-Breen, Student Borrower Protection Center
• Garrett Jensen, California State Assembly
• State Senator Jennifer McEwen, Minnesota
• Assemblymember Phil Steck, New York

Moderated by Lee Hepner, American Economic Liberties Project

Our efforts build on a rich history of labor advocacy, and these new stay-or-pay contracts are part of an equally long and disturbing history of worker suppression by industry. We’ve observed broad and consistent popularity and bipartisan support among legislators to ban these agreements, including work done by the elected officials on our panel in Minnesota and New York. To harness this, we can drive state-level change by organizing grassroots support, gaining the backing of legislative leaders and committee chairs, and collaborating with state attorneys general offices to build public understanding that this fight is rooted in the centuries-long commitment to fair dealing in the economy and fair treatment in the workplace.

• Laura Huizar, U.S. Department of Labor
• Julie Morgan, Consumer Financial Protection Bureau
• Jessica Rutter, National Labor Relations Board

Moderated by Mike Pierce, Student Borrower Protection Center

A range of federal agencies regulate aspects of employers’ relationships with workers, including the terms of contracts that may drive these workers into debt. Using TRAPs as a case study, a panel of senior officials from the Department of Labor, Consumer Financial Protection Bureau, and National Labor Relations Board discussed how their agencies are challenging anticompetitive practices and dismantling legal and economic tools used by big corporations to tip the scales against workers. To help leaders in the federal government build the case for action, advocates should continue to advance the narrative we’ve built around the economy: regular people are being crushed by a never-ending load of credit card debt, student debt, TRAP debt, and more, and this status quo needs to end.

• Daniel Hanley, Open Markets Institute
• Dalié Jiménez, UC Irvine School of Law & Student Loan Law Initiative
• Emma Oppenheim, Consumer Financial Protection Bureau
• Marshall Steinbaum, University of Utah & Jain Family Institute

Moderated by Reed Shaw, Governing for Impact

An important reminder—contractual agreements don’t equal government enforcement! Thus, advocating for regulatory non-enforcement of stay-or-pay agreements can be an incredibly effective next step. But this doesn’t go far enough—industry lawyers operating in states where these agreements are unenforceable are still drafting these agreements, knowing that the vast majority of workers don’t know this or have no way to fight it. Scholars and advocates are in a unique position; equipped with information, they can influence and provide agencies that regulate the workplace, the marketplace, and the economy with the evidence they need to take action.

• BreAnn Scally, former PetSmart groomer
• Kate Fredericks, former Ameriflight pilot

Moderated by Dave Jamieson, HuffPost

This was a POWERFUL conversation with BreAnn Scally and Kate Fredericks—both victims of TRAPs. BreAnn joined PetSmart to gain grooming experience so she could one day open her own animal rescue operation. But the TRAP in her contract stuck her with a bill for $5,500 when she left, even after she generated more than that amount for PetSmart to pay it off. In Kate’s case, after spending time in dangerous working conditions for low pay at Ameriflight, she owed them $20,000 in TRAP debt when she left for a safer and better-paid union pilot job, even though all of her training was required by the Federal Aviation Administration. It was extraordinarily important to center the voices of real workers who have experienced these TRAPs as we discussed the road ahead.

• Sparky Abraham, Jubilee Legal
• Julia Barnard, Consumer Financial Protection Bureau
• Khandice Lofton, Student Borrower Protection Center
• Josh Schieber, California Department of Financial Protection and Innovation

Moderated by Jonathan Glater, UC Berkeley School of Law & Student Loan Law Initiative

The prevalence of predatory tech bootcamps that use harmful Income-Share Agreements (ISAs)—a precursor to the widespread use of TRAPs, often justified by the same logic– has ballooned. California’s Department of Financial Protection and Innovation requires consent orders and licensures for companies seeking to use ISAs—best practices that should be widely adopted and may serve as a model to rein in employers that use TRAPs and other employer-driven debt schemes. Government enforcement is critical to protect tech workers because contractual tricks and traps, like settlement agreements and private arbitration that often favors industry make it easier for companies to stay in the shadows as they harm workers. If a company wants to enforce an unfair,unconscionable, or otherwise unlawful contract—let them try their luck explaining that in open court!