TRAP Agreements: Both Employees and Employers Need to Understand Them
Estimated reading time: 3 minutes
There was a recent article in the HR Brew newsletter titled “If your company pays for an employee’s training and then they quit, should they have to pay back the money?” The article talks about a TRAP (training repayment agreement provision). Basically, it’s an agreement that says the employee will repay any training costs if they leave the organization – either voluntarily or involuntarily.
In a TRAP, both the employee and employer agree in writing to the total training coursework and budget. The agreement might include a repayment schedule using a sliding scale to encourage employees to stay with the company. So, the longer an employee stays with the company after completion of the course, the less they have to pay back. There could also be a section of the agreement which designates a minimum grade requirement for reimbursement, similar to a tuition reimbursement program.
Now some of you might be saying, “You’re joking, right?!”. Sadly, no. In fact, an increasing number of U.S. companies are charging employees for job training if they quit. According to an article on Reuters, nearly 10% of U.S. workers are covered by a TRAP.
This doesn’t mean that the practice of making employees repay training costs isn’t attracting attention. Lawmakers are working with the Consumer Financial Protection Bureau (CFPB) to learn more about the practice. And some states are expanding their labor laws to require employers to cover training costs.
If you want to learn more about TRAP, I found a very detailed read on Business.com about what TRAPs are with examples and some advantages to using them. What’s interesting about this article is that an advantage of TRAPs from an employer perspective can be a huge disadvantage for employees. For instance, let’s say that an employer asks an employee to sign an agreement to repay $30,000 in training costs if the employee leaves before three years. Well, that’s good for an employer. They want to know that they’re not training an employee who will just quit once they get those new skills. And on some level, it’s good for the employee because they’re getting a commitment to training.
BUT, for employees in low-paying jobs this could force them to stay in a job that keeps them from getting ahead in their career. If an employee is faced with poor working conditions, it might prevent them from leaving. Or if an employee has a personal situation like an unexpected caregiving need, then they aren’t able to quit and take care of it. Some people are equating TRAPs to the student loan debt challenges that many individuals face today.
I titled today’s article “Both Employees and Employers Need to Understand TRAP Agreements” for a reason. Employers might want to weigh the impact of implementing a TRAP on recruitment, engagement, and retention. They should also consider having legal counsel review agreements, especially the repayment language. And make sure that any TRAP is in compliance with state labor laws including wage deduction regulations.
Employees who are asked to sign a TRAP need to weigh whether they want to work for a company that makes you repay the cost of training. They might also want to research whether the cost they are being asked to repay seems reasonable – meaning is the cost of training ridiculously expensive. And finally, it’s important for employees to understand how the repayment schedule works and what impact it would have on their paycheck.
Where TRAPs are concerned, employers and employees have a lot to think about. The best way to do that is by starting with good information.
Image captured by Sharlyn Lauby while exploring the streets of Long Beach, CA
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