Stay or pay: Are you in compliance?
November 14, 2024 | Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR
On Oct. 7, 2024, the National Labor Relations Board (NLRB) issued a memo regarding Training Repayment Agreement Provisions (TRAPS), sometimes known as “stay-or-pay” agreements.
The agreements require employees to remain with the organization for a defined period of time in exchange for employer payments toward a variety of programs that may include education assistance, tuition reimbursement, payment toward certification or licensure programs, quit fees, damages clauses, sign on bonuses, repayment of moving expenses and other types of cash payments tied to a mandatory stay period. Failure to remain with the organization for the specified period of time could result in requiring part or all of the employer payment.
Jennifer Abruzzon, the general counsel of the NLRB indicated that the stay-or-pay provisions can interfere with employee rights under Section 7 of the National Labor Relations Act (NLRA). The NLRA applies to both union and nonunion employers. Abruzzon argued that employees subject to the “stay-or-pay” provision would be discouraged from engaging in a protected activity that might include changing their working conditions, organizing a union, collectively advocating for such as changes or concertedly threatening to quit if the changes are not forthcoming.
Section 7 allows employees to “meet and confer” with other employees on items such as wages, hours, working conditions and other areas of employment with other employees. Abruzzon argued that similar to noncompete agreements, such arrangements might restrict employee mobility, make resignations more difficult, infringe on workers’ rights to improve working conditions or create financial hardship, create fear of termination and so on.
The General Counsel intends to exercise prosecutorial discretion by providing employers until Dec. 6, 2024, to review and “cure” preestablished stay or pay provisions.
The memo urges the National Labor Relations Board (NLRB) to find stay or play provisions unlawful unless employers demonstrate that:
- The agreements advance a legitimate business interest.
- The were voluntarily entered into in exchange for a benefit conferred on the employees.
- The repayment amount is no more than the cost to the employer of the benefit bestowed and is specified up front.
- The stay period is reasonable “based on factors such as the cost of the benefit bestowed, its value to the employee, whether the repayment amount decreases over the course of the say period and the employee’s income.”
- No repayment is required if employees are terminated without cause.
What should employers do now?
- While the memo is not binding at this point, continue to monitor further developments from the NLRB on this issue.
- Consult with legal counsel to review current programs and contracts that may fall under this stay-or-pay memo.
- Consider careful drafting and redrafting of any related documents to be consistent with the five points above.
Topics: Human Resources
Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR
Larry Morgan, MAIR, SPHR, SHRM-SCP, GPHR, owner of Orion HR Group, LLC, provides consulting services on a wide range of HR issues. He has more than 40 years of HR experience with a broad range of industries. Larry is the voice behind the MNCPA HR Hotline and a regular contributor to the organization’s Footnote magazine. He has been quoted in HR Magazine, World at Work, Upsize Magazine, Minneapolis Star Tribune, St. Paul Pioneer Press, and many other respected publications. Larry received the Lifetime Recognition Award by the Twin Cities Compensation Network in 2017 for his work in compensation and human resources and the Friend of the Profession Award by the Minnesota Society of CPAs in 2022 for his work with MNCPA members regarding HR issues.
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