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Reports Stay-or-Pay: Federal Actions to End Modern-Day Indentured Servitude Across the Economy

Stay-or-Pay: Federal Actions to End Modern-Day Indentured Servitude Across the Economy

Governing for Impact, Towards Justice, the American Economic Liberties Project, and the Student Borrower Protection Center released a groundbreaking new policy roadmap outlining a broad range of executive actions that agencies across the federal government must take to curb so-called “Stay-or-Pay” contracts. 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 their mobility and bargaining power. When they do leave, workers are hit with a crushing financial penalty just because they left their job.

Stay-or-pay contracts take many forms. For example, last year the giant pet retailer PetSmart made headlines for threatening to stick low-wage pet groomers who quit with thousands of dollars in illegal training debt via a Training Repayment Agreement Provision, or “TRAP,” buried in the fine print of its employment contracts. Other employers have included contract clauses that require workers to pay liquidated damages if they separate or even clauses purporting to allow employers to sue for unspecified damages, including the purported “lost profits” that follow from employee turnover. Stay-or-pay contracts are proliferating across the economy, harming workers in industries including transportation, health care, retail, aviation, and tech.

A copy of this compendium, Stay-or-Pay: Federal Actions to End Modern-Day Indentured Servitude Across the Economy, is available here: https://protectborrowers.org/wp-content/uploads/2023/12/stay-or-pay-compendium_12-2023_FINAL.pdf

Stay-or-pay contracts take many forms. For example, last year the giant pet retailer PetSmart made headlines for threatening to stick low-wage pet groomers who quit with thousands of dollars of illegal training debt via a Training Repayment Agreement Provision, or “TRAP,” buried in the fine print of its employment contracts. Other employers have included contract clauses that require workers to pay liquidated damages if they separate or pursue work at a rival or even clauses purporting to allow employers to sue for unspecified damages, including the “lost profits” that follow from losing a worker. Stay-or-pay contracts are proliferating across the economy, harming workers in the transportation, health care, retail, aviation, and tech industries.

The Biden administration has already taken action against some of these practices, including through the Federal Trade Commission’s proposed rule prohibiting traditional and certain de facto non-compete clauses, the Consumer Financial Protection Bureau’s inquiry into employer-driven debt, and litigation by the Department of Labor and the National Labor Relations Board. The following slate of recommendations spans additional agencies and builds on previous requests from workers and advocates by adding supporting legal analysis and further policy details.


Read the Full Compendium: Stay-or-Pay: Federal Actions to End Modern-Day Indentured Servitude Across the Economy

Read the Fact Sheet: Fact Sheet: Protecting Workers from Exploitative Stay-or-Pay Contracts

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