Paying Back Training Costs or Bonuses Under a Training Repayment Agreement

Over the last several years, employers have been experiencing what many are coining “The Great Resignation”. As employees become dissatisfied in their work and begin to look for new opportunities, employers are left trying to find ways to recruit and retain workers. One way employers are attempting to retain their employees is through sign-on bonuses and training repayment agreements, known as “TRAs”. While some employers find success in implementing TRAs, these agreements have come under intense scrutiny by both federal and state regulators. So, what are TRAs and can employers use them successfully?

A training repayment agreement is a type of employment contract in which the employee agrees to repay any training costs associated with the job if they quit within a certain time. TRAs are used in a variety of industries but are increasingly used in industries that are experiencing staffing shortages, such as nursing and trucking. For example, a nursing agency may hire a nurse and agree to pay for his/her training, so long as the nurse stays with the agency for a set number of months or years. The nurse would sign a TRA agreeing to repay training costs if he/she were to quit before the specified time. While employers can benefit from TRAs by screening candidates, recouping costs, and retaining employees, these types of agreements are being challenged for their legality.

Under the Fair Labor Standards Act, which governs wage laws, TRAs cannot be used to shift the cost of operating a business to the employee. If the training is required for the employee to do the job they are hired for, employers cannot require employees to pay all of those costs. However, if the employee benefits from the training, such as gaining transferable skills or obtaining licenses or degrees that can be used in other jobs, it is reasonable for the employee to have to pay some of those costs should they quit before the TRA expires. However, many employers are taking advantage of these agreements and requiring employees to pay back more than the actual training costs.

Both the Federal Trade Commission and the National Labor Relations Board, along with a handful of states, have taken steps to limit the use of TRAs, viewing them as a form of non-competes. Both the FTC and NLRB have taken the view that non-competes, and now TRAs, unfairly restrict employees from being able to leave their jobs or bargain with their current employers. So, while employers can still use these agreements, it’s important to keep in mind the level of the employee, the type of training required, the actual cost of the training, and the benefit to the employee before enforcing a TRA.

Are you an employee who signed a training repayment agreement? Are you an employer looking to implement a training repayment agreement? McNeelyLaw has a team of experienced Indiana employment attorneys ready to help you with all your legal needs. Give us a call at (317) 825-5110 to discuss any questions you may have.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.