Employers often invest significant time and money in recruiting and paying sign-on bonuses for new hires. They also spend on relocating, training, funding necessary licenses and certifications for new or current employees, and paying retention bonuses for current employees. To protect these investments, employers have increasingly turned to contractual provisions that require workers who receive these incentives to repay specified amounts if they leave before completing a defined period of service.

While employers generally view such terms as necessary and reasonable retention tools, lawmakers have increasingly derided them as “stay-or-pay” provisions that restrain worker mobility by imposing financial penalties on employees who change jobs.

What Are “Stay-or-Pay” Provisions?

“Stay-or-pay” provisions are contractual terms that require workers who end their employment before a specific date to repay training costs, bonuses, relocation expenses, and other expenses. These provisions generally fall into three categories:

1. Training repayment agreements (labeled by critics as “TRAPs”): The employee must repay the cost of training or education provided by the employer if they leave within a certain period.
2. Sign-on or retention bonus clawbacks: A bonus paid at hire or at a milestone is subject to repayment if the employee departs before the end of a specified retention period.
3. Relocation cost recovery: The employer regains moving expenses, relocation expenses, or similar outlays...

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