The Clash famously asked “Should I stay, or should I go?” on their 1982 album, Combat Rock, and with recent attacks on non-competes at both the state and federal level, some employers are imposing additional costs on employees who take advantage of an employer’s training opportunities only to leave and join a competitor. So-called “stay or pay” clauses, or training-repayment-agreement-provisions (TRAPs), typically require an employee to pay the employer the cost the employer incurred to train the employee if the employee leaves their employment within a certain period of time.
Historically, these clauses were used in employment agreements for high-paying roles or certain specialized industries where there was a dearth of talent at various times, such as airline pilots. With the recent heightened scrutiny on noncompetes and other restrictive covenants, “stay or pay” clauses have become a popular mechanism for employers across all industries to protect their investment in hiring and training employees, as well as to disincentivize attrition.
While there are benefits to including “stay or pay” clauses in employment agreements, employers should also be aware of the potential risks before seeking to enforce such provisions, including potential wage and hour concerns, and heightened scrutiny by federal enforcement agencies.
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