A recent New York Times article described growing use by employers of training repayment agreements, or TRAs. A TRA requires an employee to repay training expenses incurred by the employer if they quit before a certain period of time. In some industries, these expenses can run into six figures. The article argued that employers are using TRAs as an alternative to non-competition agreements that have been outlawed or severely restricted in many states.

Using and enforcing TRAs runs legal risks for employers. Employees faced with demands for repayment of expenses following their resignation may contend that the agreements violate state consumer or fair business practice laws. These concerns are magnified if the training was required by the employer as a condition of employment, as opposed to a voluntary tuition reimbursement agreement for studies that would benefit the worker in multiple similar jobs. The National Labor Relations Board and Federal Trade Commission have begun regulatory efforts to restrict use of TRAs by employers. In addition, a number of states have proposed legislation restricting this practice.

A traditional agreement that requires repayment of a signing bonus would not be considered a TRA. If the agreement provides for an upfront direct payment to the employee, the employer can generally require repayment of all or a portion of this amount if the employee resigns before a set period of time. However, use of reimbursement agreements primarily intended to deter employees from quitting poses a growing risk of legal liability for companies struggling to contain employee turnover.

For more information, please contact me or your regular Parker Poe contact. You can also subscribe to our latest alerts and insights here.