GC 25-01 Remedying the Harmful Effects of Non-Compete and "Stay-or-Pay" Provisions that Violate the National Labor Relations Act

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OFFICE OF THE GENERAL COUNSEL

MEMORANDUM GC 25-01

October 7, 2024

TO:

All Regional Directors, Officers-in-Charge,

and Resident Officers

FROM:

Jennifer A. Abruzzo, General Counsel

SUBJECT:

Remedying the Harmful Effects of Non-Compete and “Stay-or-Pay”

Provisions that Violate the National Labor Relations Act

In May 2023, I issued a GC Memorandum taking the position that, except in

limited circumstances, the proffer, maintenance, or enforcement of non-compete

provisions violates the National Labor Relations Act (NLRA or Act).1 Part I of this memo

provides additional information about my intent to urge the Board not only to find certain

non-compete provisions unlawful but also, as fully as possible, to remedy the harmful

effects on employees when employers use and apply them. In addition, I believe that

certain “stay-or-pay” provisions, under which an employee must pay their employer if

they separate from employment, infringe on employees’ Section 7 rights in many of the

same ways that non-compete agreements do and that such provisions therefore also

violate Section 8(a)(1) of the Act unless narrowly tailored to minimize that infringement.

Part II of this memo sets forth my proposed framework for assessing the lawfulness of

such provisions, the remedies I intend to seek before the Board, and the circumstances

under which I will decline to issue complaint against preexisting stay-or-pay

arrangements.

I.

Remedying the Effects of Unlawful Non-Compete Provisions

While the financial harms caused by unlawful workplace rules or contract terms

usually relate to enforcement actions, such as discipline or legal enforcement taken

pursuant to such provisions, in the case of non-compete provisions there are also more

pernicious harms

ne to issue complaint against preexisting stay-or-pay

arrangements.

I.

Remedying the Effects of Unlawful Non-Compete Provisions

While the financial harms caused by unlawful workplace rules or contract terms

usually relate to enforcement actions, such as discipline or legal enforcement taken

pursuant to such provisions, in the case of non-compete provisions there are also more

pernicious harms. Such provisions are, in fact, often “self-enforcing” in that employees

may forgo certain opportunities out of fear of breaching their contractual obligations.2

Accordingly, non-compete provisions can restrict the ability to change jobs or leverage

one’s outside options to obtain a raise, which are common ways employees improve

their income and employment terms.3 In other words, unlawful non-compete provisions

may have a harmful financial impact on employee wages and benefits by explicitly

1 Memorandum GC 23-08, Non-Compete Agreements that Violate the National Labor Relations Act,

dated May 30, 2023.

2 See, e.g., FTC Non-Compete Clause Rule, 89 Fed. Reg. 38,342, 38,378-81 (May 7, 2024) (codified at

16 C.F.R. pt. 910) (determining that most non-compete agreements constitute unfair methods of

competition by limiting employee mobility, even absent enforcement), set aside by Ryan, LLC v. FTC, No.

3:24-CV-00986-E, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024).

3 NAJAH A. FARLEY, NAT’L EMPLOYMENT LAW PROJECT, FAQ ON NON-COMPETE AGREEMENTS (2022),

https://www.nelp.org/publication/faq-on-non-compete-agreements (noting that “[c]hanging a job is one of

the most common ways workers receive higher pay” and that non-competes limit employees’ “opportunity

to bargain for a higher wage and demand a better workplace”).

Rescinded 2/14/2025 by Memorandum GC 25-05

NAJAH A. FARLEY, NAT’L EMPLOYMENT LAW PROJECT, FAQ ON NON-COMPETE AGREEMENTS (2022),

https://www.nelp.org/publication/faq-on-non-compete-agreements (noting that “[c]hanging a job is one of

the most common ways workers receive higher pay” and that non-competes limit employees’ “opportunity

to bargain for a higher wage and demand a better workplace”).

Rescinded 2/14/2025 by Memorandum GC 25-05

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restricting employees’ job opportunities. And for those employees who separate from

employment, these provisions often create additional financial burdens. For example, to

avoid violating a non-compete, former employees may need to relocate, take a lower-

paying job rather than one in their field, or pay for training to qualify for a position not

covered by the provision.4

Accordingly, where the Board finds an employer has maintained an unlawful non-

compete provision, rescission alone will fail to remedy all the harms caused by the

provision, and make-whole remedies to unwind discipline or legal enforcement actions,

while also necessary, will not be sufficient.5 Whether or not an employer has attempted

to enforce its unlawful non-compete provision against any employees, the additional,

pernicious financial harms it has caused must also be remedied as fully as possible to

make employees whole. As the Supreme Court has made clear, “[t]he task of the Board

in applying [Section] 10(c) is to take measures designed to recreate the conditions and

relations that would have been had there been no unfair labor practice.”6 Simply put, the

goal is to place employees in the same position, as nearly as possible, in which they

would have been had the employer not maintained the unlawful provision. Thus, where

an employer has maintained an unlawful non-compete provision, the harmful financial

effects caused by current employees’ and former employees’ attempts to comply with

the provision must be remedied

practice.”6 Simply put, the

goal is to place employees in the same position, as nearly as possible, in which they

would have been had the employer not maintained the unlawful provision. Thus, where

an employer has maintained an unlawful non-compete provision, the harmful financial

effects caused by current employees’ and former employees’ attempts to comply with

the provision must be remedied.

Make-whole relief for an overbroad rule’s harmful effects on employees is

consistent with case law awarding monetary relief for other types of Section 8(a)(1)

violations. To start, any discipline violative of Section 8(a)(1) warrants a make-whole

remedy.7 More broadly, the Board regularly orders employers to remedy economic

harms caused by non-disciplinary acts that violate Section 8(a)(1). For example, the

Board has ordered employers to reimburse employees for damage to their personal

property and for costs associated with retrieving it.8 Similarly, it has ordered

4 See, e.g., EVAN STARR ET AL., THE USE, ABUSE, AND ENFORCEABILITY OF NON-COMPETE AND NO-POACH

AGREEMENTS 8 (Econ. Innovation Group, 2019), available at https://eig.org/non-compete-brief/ (noting that

non-competes influence “where and in which industry individuals work”).

5 I am urging the Board to grant make-whole relief to all employees disciplined or subject to legal

enforcement actions pursuant to an unlawful rule or contract term (e.g., overbroad provisions in an

employment or noncompete agreement) where the conduct targeted at least touches the concerns

animating Section 7, regardless of whether enforcement was alleged as an independent violation in the

complaint. See Memorandum GC 24-04, Securing Full Remedies for All Victims of Unlawful Conduct,

dated April 8, 2024

tions pursuant to an unlawful rule or contract term (e.g., overbroad provisions in an

employment or noncompete agreement) where the conduct targeted at least touches the concerns

animating Section 7, regardless of whether enforcement was alleged as an independent violation in the

complaint. See Memorandum GC 24-04, Securing Full Remedies for All Victims of Unlawful Conduct,

dated April 8, 2024. Due to the nature of non-compete clauses, any enforcement against mere

employment—as opposed to establishment of a business—necessarily targets conduct that touches the

concerns animating Section 7 inasmuch as securing a new job is one means of improving terms and

conditions of employment. Thus, in addition to the remedies for mere maintenance discussed herein, an

employer who brings a breach of contract or similar claim pursuant to an unlawful non-compete provision

must also retract the legal action and make any employees whole, including by reimbursing employees

for legal fees and costs expended in defending against such actions.

6 Franks v. Bowman Transp. Co., 424 US. 747, 769 (1976); NLRB v. J.H. Rutter-Rex Mfg. Co., 396 U.S.

258, 263 (1969) (the purpose of a make-whole remedy is to “restor[e] the economic status quo that would

have obtained but for” the unfair labor practice).

7 See, e.g., Butler Medical Transport, LLC, 365 NLRB No. 112, slip op. at 4, 9 (2017).

8 See, e.g., Napleton 1050, Inc. d/b/a Napleton Cadillac of Libertyville, 367 NLRB No. 6, slip op. at 4

1976); NLRB v. J.H. Rutter-Rex Mfg. Co., 396 U.S.

258, 263 (1969) (the purpose of a make-whole remedy is to “restor[e] the economic status quo that would

have obtained but for” the unfair labor practice).

7 See, e.g., Butler Medical Transport, LLC, 365 NLRB No. 112, slip op. at 4, 9 (2017).

8 See, e.g., Napleton 1050, Inc. d/b/a Napleton Cadillac of Libertyville, 367 NLRB No. 6, slip op. at 4

(2018) (employer ordered to compensate employees for expenses incurred related to their toolboxes,

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compensation for individuals who cannot work as a result of injury caused by an

employer.9 Thus, extending make-whole relief to cases involving unlawful non-compete

provisions would be consistent with the Board’s remedies for other unlawful conduct that

harms employees financially.

Accordingly, in order to compensate employees for the ill effects of unlawful non-

compete provisions since the start of the Section 10(b) period, the Region should seek

make-whole relief in the following manner. First, employees10 should be permitted to

come forward during the notice-posting period and demonstrate that they were deprived

of a better job opportunity as a result of the non-compete provision. In particular, an

employee must demonstrate that: (1) there was a vacancy available for a job with a

better compensation package; (2) they were qualified for the job; and (3) they were

discouraged from applying for or accepting the job because of the non-compete

provision.11 Where a Region determines, in compliance, that these criteria are satisfied,

the employer must compensate the employee for the difference (in terms of pay or

benefits) between what they would have received and what they did receive during the

same period.12

Second, individuals who separated from the employer since the start of the

Section 10(b) period may also be entitled to make-whole relief for additional harms or

costs associated with complying with the unlawful non-compete provision during the

post-employment period, until those res

y or

benefits) between what they would have received and what they did receive during the

same period.12

Second, individuals who separated from the employer since the start of the

Section 10(b) period may also be entitled to make-whole relief for additional harms or

costs associated with complying with the unlawful non-compete provision during the

post-employment period, until those restrictions expired. For example, a former

employee may be able to demonstrate that they were out of work for a longer period

than they would otherwise have been as a result of the non-compete, thereby entitling

them to payment for those lost wages. They could do so by satisfying similar criteria as

that discussed above, i.e., that there was a position available during their job search for

which they were qualified but that they were discouraged from applying or accepting the

position as a result of the non-compete provision. Further, where an individual accepted

a job providing lesser compensation (in terms of pay or benefits) outside of their industry

(but within the geographic scope of the non-compete provision), they should be entitled

to the difference between what they would have received and what they did receive

because they were foreclosed from pursuing other job opportunities due to the non-

which were removed from employer’s facility during strike in violation of Section 8(a)(1)), enforced, 976

F.3d 30 (D.C. Cir. 2020).

9 See, e.g., Freeman Decorating Co., 288 NLRB 1235, 1241 (1988) (employer required to compensate

steward wrongfully evicted from employer’s premises for loss suffered due to injuries if shown in

compliance); Graves Trucking, 246 NLRB 344, 345 (1979) (ordering employer to pay employee for time

he could not work as a result of disability caused by supervisory assault), enforced as modified, 692 F.2d

470 (7th Cir. 1982)

orating Co., 288 NLRB 1235, 1241 (1988) (employer required to compensate

steward wrongfully evicted from employer’s premises for loss suffered due to injuries if shown in

compliance); Graves Trucking, 246 NLRB 344, 345 (1979) (ordering employer to pay employee for time

he could not work as a result of disability caused by supervisory assault), enforced as modified, 692 F.2d

470 (7th Cir. 1982).

10 Although typically it will be current employees coming forward with such evidence, former employees

may be able to make the same showing for the period in which they were employed by the charged-party

employer since the start of the Section 10(b) period.

11 Any uncertainty about whether the employee would have been hired by the other company, the salary

they would have earned, or their exact start date should be resolved in favor of the employee under

longstanding principles. See, e.g., State Distributing Co., 282 NLRB 1048, 1049 (1987) (“it is proper to

resolve uncertainties against the one whose unlawful acts have created those uncertainties” where the

employer’s unfair labor practice has left the Board with “less-than-perfect remedial choices”).

12 Similar relief is also warranted where maintenance of an anti-moonlighting provision discourages

employees from pursuing or accepting a second job.

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compete provision’s restriction for the duration that restriction was effective.13

Conversely, if an individual had to move outside of the geographic region to obtain

employment within the industry, they should be compensated for moving-related costs.

Finally, employees should be compensated for the costs of any retraining efforts

undertaken to be eligible for a position in a different industry not covered by the provision

n for the duration that restriction was effective.13

Conversely, if an individual had to move outside of the geographic region to obtain

employment within the industry, they should be compensated for moving-related costs.

Finally, employees should be compensated for the costs of any retraining efforts

undertaken to be eligible for a position in a different industry not covered by the provision.

While these harms would be accounted for already in calculating backpay and other

foreseeable harms for unlawfully discharged or constructively discharged employees,

those who voluntarily resigned or were lawfully terminated should also be compensated

for facing these added difficulties in securing new employment, which are incurred as a

direct result of the non-compete provision.

To assist the Regional offices with ensuring employees are fully compensated for

these types of harms, I am recommending that the Board amend its standard notice

posting to solicit relevant information from employees.14 In this regard, the notice should:

(1) alert employees that they may be entitled to a differential (in terms of wages or

benefits) if they were discouraged from pursuing, or were unable to accept, other job

opportunities due to the non-compete provision; (2) notify employees that they may be

entitled to other compensation if they separated from employment and had difficulty

securing comparable employment due to the non-compete provision, such as by being

unemployed longer, accepting a job with a lower compensation package, moving outside

the provision’s geographic scope, or incurring retraining costs to become qualified for

jobs in a different industry; and (3) include language directing individuals to contact the

Regional office during the notice-posting period if they have evidence related to (1) or

e non-compete provision, such as by being

unemployed longer, accepting a job with a lower compensation package, moving outside

the provision’s geographic scope, or incurring retraining costs to become qualified for

jobs in a different industry; and (3) include language directing individuals to contact the

Regional office during the notice-posting period if they have evidence related to (1) or

(2). Furthermore, in every case, the Board should order mailing of the notice to ensure

that current employees, as well as former employees who were subject to the non-

compete provision since the start of the Section 10(b) period, have an opportunity to

read the notice and take steps during the notice-posting period to obtain relief, if

appropriate.

By allowing employees to come forward with evidence showing such financial

harms, the Board can reasonably approximate the damages caused by an employer’s

wrongful maintenance of an overbroad non-compete provision.15

13 If the individual cannot point to specific comparator job opportunities within the industry because they

were not pursuing them as a result of the non-compete, the Region may use other evidence to provide a

within-industry earnings estimate. Where no such evidence is available, the Region could base the

calculation on the compensation the former employee would have received during that period at the

employer. If, however, the employee was discouraged from pursuing a better job opportunity while

employed by the charged party-employer, they would be entitled to the difference between their new job

and that earlier opportunity.

14 This aligns with the similar procedure I recommended in United Wholesale Mortgage, Case 07-CA-

297897, brief to the Board filed March 18, 2024, regarding discipline or enforcement of unlawful rules or

contract terms

from pursuing a better job opportunity while

employed by the charged party-employer, they would be entitled to the difference between their new job

and that earlier opportunity.

14 This aligns with the similar procedure I recommended in United Wholesale Mortgage, Case 07-CA-

297897, brief to the Board filed March 18, 2024, regarding discipline or enforcement of unlawful rules or

contract terms. Regions should pursue changes to the notice posting consistent with that guidance with

respect to all the unlawful rules (including language alerting employees that they may be entitled to a

remedy if they were disciplined or subject to legal enforcement under an unlawful provision) as well as the

modifications discussed above that are specific to a non-compete rule.

15 See Bagel Bakers Council of Greater N.Y. v. NLRB, 555 F.2d 304, 305 (2d Cir. 1977) (“A back pay

award is only an approximation, necessitated by the employer’s wrongful conduct.”); see also Va. Elec. &

Power Co. v. NLRB, 319 U.S. 533, 544 (1943) (“[t]he fact that the Board may only have approximated its

efforts to make employees whole, because of asserted benefits of [a] dubious and unascertainable

nature,” does not render the remedy impermissible under Section 10(c)).

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II. Stay-or-Pay Provisions that Violate the Act

Like non-compete agreements, stay-or-pay provisions have become increasingly

common in American workplaces in recent years.16 These provisions take a variety of

forms, including training repayment agreement provisions (sometimes referred to as

TRAPs), educational repayment contracts, quit fees, damages clauses, sign-on bonuses

or other types of cash payments tied to a mandatory stay period, and other contracts

under which employees must pay their employer in the event that they voluntarily or

involuntarily separate from employment.17 Like non-compete agreements, stay-or-pay

provisions both restrict employee mobility, by making resigning from employment

financially difficult or untenable, and increase employee fear

or other types of cash payments tied to a mandatory stay period, and other contracts

under which employees must pay their employer in the event that they voluntarily or

involuntarily separate from employment.17 Like non-compete agreements, stay-or-pay

provisions both restrict employee mobility, by making resigning from employment

financially difficult or untenable, and increase employee fear of termination for engaging

in activity protected by the Act. Accordingly, I believe that such provisions violate Section

8(a)(1) of the Act unless they are narrowly tailored to minimize any interference with

Section 7 rights.18 Only provisions that serve to recoup the cost of optional benefits

bestowed on employees, and meet other requirements described below, should be

permissible under the Act.

The term “stay-or-pay” provision generally refers to any contract under which an

employee must pay their employer if they separate from employment, whether

16 See, e.g., Robin Kaiser-Schatzlein, Pay Thousands to Quit Your Job? Some Employers Say So, N.Y,

TIMES (Nov. 20, 2023), available at https://www.nytimes.com/2023/11/20/magazine/stay-pay-employer-

contract.html?smid=nytcore-ios-share&ref (estimating that millions of American workers may be subject to

stay-or-pay provisions); Consumer Fin. Prot. Bureau, Issue Spotlight: Consumer Risks Posted by

Employer-Driven Debt (Jul. 20, 2023), https://www.consumerfinance.gov/data-research/research-

reports/issue-spotlight-consumer-risks-posed-by-employer-driven-debt/full-report/ (noting that training

repayment agreement provisions arose in the 1990’s and predominantly applied to higher-skilled, high-

wage positions, but they are now common in lower- and moderate-wage industries).

17 I do not consider repayment agreements associated with Registered Apprenticeship Programs (RAPs)

subject to regulation under the National Apprenticeship Act of 1937 to constitute “stay-or-pay provisions”

subject to the proposed test set forth herein

n the 1990’s and predominantly applied to higher-skilled, high-

wage positions, but they are now common in lower- and moderate-wage industries).

17 I do not consider repayment agreements associated with Registered Apprenticeship Programs (RAPs)

subject to regulation under the National Apprenticeship Act of 1937 to constitute “stay-or-pay provisions”

subject to the proposed test set forth herein. Many RAP scholarship or education loan agreements do not

indebt apprenticeships to one specific employer, but rather to a third-party entity, such as a jointly

managed trust fund. See, e.g., Frank Manzo IV & Erik Thorson, Ill. Econ. Policy Inst., Union

Apprenticeships: The Bachelor’s Degrees of the Construction Industry 3 (2021), available at

https://blog.dol.gov/2021/11/19/apprenticeships-and-the-labor-movement (“Joint labor-management

programs account for 97 percent of all active construction apprentices in Illinois, 94 percent in Indiana, 82

percent in Ohio, 82 percent in Wisconsin, 79 percent in Kentucky, 78 percent in Michigan, and 63 percent

in Oregon.”). Accordingly, many “stay” requirements associated with an RAP do not compel a worker to

remain employed by a particular employer, but rather allow employment with a multitude of employers.

See, e.g., Milwaukee Area Joint Apprenticeship Training Comm. v. Howell, 67 F.3d 1333, 1335 (7th Cir.

1995) (permitting repayment in the form of employment at any employer that contributes to the specific

apprenticeship fund or to any “like apprenticeship training trust fund”). In any event, the Department of

Labor already regulates such programs to “promote the furtherance of labor standards necessary to

safeguard the welfare of apprentices . . . .” 29 U.S.C. § 50. See also 29 C.F.R. § 29.7 (requiring “good

cause” to suspend or cancel apprenticeship agreement after apprentice’s probationary period); National

Apprenticeship System Enhancements, 89 Fed. Reg. 3118, 3122, 3270, 3279-80 (Jan. 17, 2024) (to be

codified at 29 C.F.R. pts

rams to “promote the furtherance of labor standards necessary to

safeguard the welfare of apprentices . . . .” 29 U.S.C. § 50. See also 29 C.F.R. § 29.7 (requiring “good

cause” to suspend or cancel apprenticeship agreement after apprentice’s probationary period); National

Apprenticeship System Enhancements, 89 Fed. Reg. 3118, 3122, 3270, 3279-80 (Jan. 17, 2024) (to be

codified at 29 C.F.R. pts. 29 & 30) (proposing, among other things, prohibition on non-compete provisions

in apprenticeship agreements, “enhanced protections against unreasonable participation costs for

apprentices,” and disclosure to apprentices of “all costs, expenses, or fees related to participation”).

18 Cf. Hudgens v. NLRB, 424 U.S. 507, 521 (1976) (“Accommodation between employees’ § 7 rights and

employers’ property rights . . . ‘must be obtained with as little destruction of one as is consistent with the

maintenance of the other.’” (quoting NLRB v. Babcock & Wilcox Co., 351 U.S. 105, 113 (1956))).

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voluntarily or involuntarily, within a certain timeframe. For example, employers

sometimes require employees to undergo specific training as a condition of employment,

but contractually obligate employees to pay the employer back for that training, or to pay

some prorated amount, in the event that they separate from employment within a given

period of time.19 The repayment amounts may be higher than the actual cost of the

training provided to the employee, and the repayment obligation often applies even if the

employer terminates the employee without cause.20 Other times, an employer may

provide an up-front monetary payment, such as a sign-on bonus or relocation stipend,

but it is not offered free-and-clear to the employee. Rather, employees are required to

pay the employer back if they separate from employment within a given period.21 In other

cases, stay-or-pay provisions are not linked to any ostensible benefit bestowed on an

employee

cause.20 Other times, an employer may

provide an up-front monetary payment, such as a sign-on bonus or relocation stipend,

but it is not offered free-and-clear to the employee. Rather, employees are required to

pay the employer back if they separate from employment within a given period.21 In other

cases, stay-or-pay provisions are not linked to any ostensible benefit bestowed on an

employee. In its harshest form, a stay-or-pay arrangement may simply impose a penalty

for separation (sometimes referred to as a “quit fee” or “breach fee”) or pass to the

employee certain business costs or losses (e.g., costs of hiring and training a

replacement, lost profits caused by the employment vacancy) by means of a liquidated

or unspecified damages clause if the employee resigns within a given period of time.22

Stay-or-pay provisions have a tendency to interfere with, restrain, or coerce

employees in the exercise of the rights guaranteed in Section 7 of the Act.23 Typically,

as experience has shown, employees are economically dependent on their employers

to sustain their income and benefits and do not wish to jeopardize their jobs.24 This is

the reality of the employer-employee relationship, especially when employees are at will.

Thus, deterrents against resigning or engaging in any conduct the employer might

disapprove of, including union organizing or other concerted activity for employees’

mutual aid or protection, are already intrinsic to our system of employment.25 Retaliatory

measures employers take against employees for their union or protected concerted

activity are unfortunately not uncommon—and many employees are acutely aware of

the prospect for retaliation.26 Accordingly, where the impact of job separation is even

19 See, e.g., Kate Gibson, PetSmart’s “Grooming Academy” Traps Workers in Debt, Lawsuit Claims, CBS

NEWS (Aug. 1, 2022), https://www.cbsnews.com/news/petsmart-groomers-debt-trap-for-workers-lawsuit-

claims/

protected concerted

activity are unfortunately not uncommon—and many employees are acutely aware of

the prospect for retaliation.26 Accordingly, where the impact of job separation is even

19 See, e.g., Kate Gibson, PetSmart’s “Grooming Academy” Traps Workers in Debt, Lawsuit Claims, CBS

NEWS (Aug. 1, 2022), https://www.cbsnews.com/news/petsmart-groomers-debt-trap-for-workers-lawsuit-

claims/.

20 See, e.g., id (noting that the repayment amount greatly exceeded the value of the training, and that the

employer required the obligation be paid if the employee was fired or laid off).

21 See, e.g., Sara Falcone, Nurse.org, HCA Ends TRAPs Forcing Nurses to Repay Training Costs (May

19, 2023), https://nurse.org/articles/HCA-ends-nurse-training-repayment-contracts/ (noting employee

obtained a new credit card in order to repay over $10,000 in bonus and training costs when she resigned

in her sixth month of pregnancy because employer would not switch her to the day shift).

22 See, e.g., Paguirigan v. Prompt Nursing Employment Agency LLC, 286 F. Supp. 3d 430, 435 (E.D.N.Y.

2017) (employer subjected employees to $25,000 contract termination fee should they quit employment

within three years); Josh Eidelson, Paying to Quit or Four Months Notice Has Workers Feeling Trapped,

BLOOMBERG NEWS (Jan. 26, 2023), https://news.bloomberglaw.com/daily-labor-report/paying-to-quit-or-

four-months-notice-has-workers-feeling-trapped (healthcare worker expressed desire to resign due to

unsafe patient workloads in combination with limited break and lunch period but was required to provide

four months’ notice or pay “quit fee” equivalent to four months’ salary).

23 29 U.S.C. § 158(a)(1).

24 Stericycle, Inc., 372 NLRB No. 113, slip op. at 8-9 (2023) (citing NLRB v. Gissel Packing Co., 395 U.S.

575, 617 (1969)).

25 Id.

26 See Irene Tung & Paul Sonn, Nat’l Employment Law Project, Fired with No Reason, No Warning, No

h limited break and lunch period but was required to provide

four months’ notice or pay “quit fee” equivalent to four months’ salary).

23 29 U.S.C. § 158(a)(1).

24 Stericycle, Inc., 372 NLRB No. 113, slip op. at 8-9 (2023) (citing NLRB v. Gissel Packing Co., 395 U.S.

575, 617 (1969)).

25 Id.

26 See Irene Tung & Paul Sonn, Nat’l Employment Law Project, Fired with No Reason, No Warning, No

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greater than the attendant loss of income and benefits because a significant debt

associated with a stay-or-pay provision hangs over an employee’s head, that provision

exacerbates the risk employees already face when contemplating engaging in Section

7 activity. As a result, employees are chilled from engaging in protected activity to try to

better their working conditions in their current job—whether by organizing a union,

collectively advocating for improvements, or concertedly threatening to quit if

enhancements are not forthcoming—for fear that termination would trigger the payment

obligation.27 Likewise, such provisions reasonably tend to discourage employees from

seeking to improve their lot through job mobility by erecting a financial barrier to

quitting.28

Employers generally advance two distinct business interests for maintaining such

provisions. The first, and more problematic, is to lock employees in their jobs by imposing

a financial barrier to separation.29 Certain forms of stay-or-pay provisions, including quit

fees and damages clauses, are aimed solely at holding onto employees.30 While

employers may understandably wish to retain employees, they can do so by encouraging

them to stay through longevity bonuses or offering improved terms and conditions of

Severance 3-5 (Dec. 2022), available at https://www.nelp.org/insights-research/fired-with-no-reason-no-

warning-no-severance-the-case-for-replacing-at-will-employment-with-a-just-cause-standard/ (finding that

one in eight U.S

employers may understandably wish to retain employees, they can do so by encouraging

them to stay through longevity bonuses or offering improved terms and conditions of

Severance 3-5 (Dec. 2022), available at https://www.nelp.org/insights-research/fired-with-no-reason-no-

warning-no-severance-the-case-for-replacing-at-will-employment-with-a-just-cause-standard/ (finding that

one in eight U.S. workers has been disciplined for speaking up about job concerns and that at-will system

creates a “‘chilling’ environment” where employees refrain from doing so because of the threat of job

loss).

27 Eidelson, supra note 22 (former chief of staff for Occupational Safety and Health Administration noted

that workers have difficulty addressing safety issues when they are not free to leave employment); Nat’l

Nurses United, Comment Letter on Request for Information Regarding Employer-Driven Debt 35 (Sep.

23, 2022), available at https://www.regulations.gov/comment/CFPB-2022-0038-0048 (reporting that

training repayment obligation had a “chilling effect” on employees and that many did not want to engage

in discussion of unionization due to fear of losing their jobs, thereby triggering debt obligation); Student

Borrower Prot. Ctr., Trapped at Work: How Big Business Uses Student Debt to Restrict Worker Mobility

19 (July 2022), available at https://protectborrowers.org/trapped-at-work-how-big-business-uses-student-

debt-to-restrict-worker-mobility/ (noting that the “prospect of losing employment can be enough to prevent

victims of harassment and assault from speaking out” but that, in the case referenced, “[t]he looming

threat of financial instability created by the company enforcing a TRAP made speaking out even more

dangerous”); Consumer Fin. Prot. Bureau, supra note 16 (“Many commenters reported that employers

invoked their debt as a retort to concerns about work conditions and a strategy to induce them to continue

working.”)

t and assault from speaking out” but that, in the case referenced, “[t]he looming

threat of financial instability created by the company enforcing a TRAP made speaking out even more

dangerous”); Consumer Fin. Prot. Bureau, supra note 16 (“Many commenters reported that employers

invoked their debt as a retort to concerns about work conditions and a strategy to induce them to continue

working.”).

28 See GC 23-08 at 3-4 (arguing that the following are, or should be, protected by the Act: (1) concertedly

threatening to resign to demand better working conditions; (2) carrying out concerted threats to resign or

otherwise concertedly resigning to secure improved working conditions; (3) soliciting their co-workers to

go work for a local competitor as part of a broader course of protected concerted activity; and (4) seeking

employment, at least in part, to specifically engage in protected activity with other workers at an

employer’s workplace).

29 See, e.g., Heartland Sec. Corp. v. Gerstenblatt, No. 99 Civ. 3694 WHP, 2000 WL 303274, at *7

(S.D.N.Y. Mar. 22, 2000) (federal judge compared a training repayment agreement’s $200,000 repayment

scheme to indentured servitude and found that the employer’s “true purpose” in using the contract was to

dissuade employees from quitting); Consumer Fin. Prot. Bureau, supra note 16 (“research suggests that

the rise in prevalence [of TRAPs] is attributable to employers’ search for alternative means of

discouraging employee turnover as non-compete agreements come under regulation and legal scrutiny”).

30 Cf. Michael Sainato, ‘I Feel Like a Criminal for Quitting’: Nurses Fight ‘Stay-or-Pay’ Agreements,

GUARDIAN (Dec. 29, 2023), available at https://www.theguardian.com/us-news/2023/dec/29/nurse-

contract-fees-stay-or-pay-communicare (employer sued nurse for $100,000 under contractual damages

provision).

employee turnover as non-compete agreements come under regulation and legal scrutiny”).

30 Cf. Michael Sainato, ‘I Feel Like a Criminal for Quitting’: Nurses Fight ‘Stay-or-Pay’ Agreements,

GUARDIAN (Dec. 29, 2023), available at https://www.theguardian.com/us-news/2023/dec/29/nurse-

contract-fees-stay-or-pay-communicare (employer sued nurse for $100,000 under contractual damages

provision).

8

employment. Employers do not have a legitimate business interest in forcing employees

to remain employed in a given workplace against their will through the use of coercive

contractual arrangements. Indeed, courts have frowned upon the use of stay-or-pay

provisions to advance the purported interest of employee retention given the Thirteenth

Amendment’s prohibition against indentured servitude, among other concerns.31 For

these reasons, I believe quit fees, damages clauses, and other stay-or-pay provisions

whose sole purpose is to force employees to remain employed by imposing fees if they

separate are unlawful under the Act.32

The second business interest cited by employers in maintaining stay-or-pay

provisions is to recoup payments toward employee benefits where an employee does

not remain employed long enough for the business to reap its anticipated returns. While

this may reflect a legitimate business interest, given that all stay-or-pay provisions have

the potential to interfere with employee rights, it is my position that recoupment terms

must still be narrowly tailored to minimize any such interference.

I will therefore urge the Board to find that any provision under which an employee

must pay their employer if they separate from employment, whether voluntarily or

involuntarily, within a certain timeframe is presumptively unlawful

have

the potential to interfere with employee rights, it is my position that recoupment terms

must still be narrowly tailored to minimize any such interference.

I will therefore urge the Board to find that any provision under which an employee

must pay their employer if they separate from employment, whether voluntarily or

involuntarily, within a certain timeframe is presumptively unlawful. The employer may

rebut that presumption by proving that the stay-or-pay provision advances a legitimate

business interest33 and is narrowly tailored to minimize any infringement on Section 7

rights, that is, the provision: (1) is voluntarily entered into in exchange for a benefit; (2)

has a reasonable and specific repayment amount; (3) has a reasonable “stay” period;

31 See, e.g., Heartland, 2000 WL 303274, at *7; Wilson v. Clarke, 470 F.2d 1218, 1223 (1st Cir. 1972)

(noting, in context of liquidated damages provision, that an employer “may not require its ex-employee to

make payments to it unrelated to the employer’s damage, simply as a penalty to discourage a job

change” and stating, as a general rule of law, that an employee’s “aptitudes, [their] skill, [their] dexterity,

[their] manual or mental ability, . . . are not [their] master’s property”) (emphasis added; internal quotations

omitted); McAfee v. LifeStance Health Grp. Inc., No. CV-23-01144-PHX-DJH, 2024 WL 1115831, at *7

(D. Ariz. 2024) (denying motion to dismiss plaintiffs’ claim that the “advance on compensation

arrangement” in employment contract, which required employees to repay the advance if they left

employment before the employer could recover the amount of the advance in the form of insurance

billing, created “indentured servitude” relationship in violation of the Thirteenth Amendment); Paguirigan,

286 F. Supp. 3d at 435 (refusing to dismiss claim under Trafficking Victims Protection Act where $25,000

termination fee for resigning was allegedly “designed to coerce the nurses into continuing their

employment”); see also Pollock v

er the amount of the advance in the form of insurance

billing, created “indentured servitude” relationship in violation of the Thirteenth Amendment); Paguirigan,

286 F. Supp. 3d at 435 (refusing to dismiss claim under Trafficking Victims Protection Act where $25,000

termination fee for resigning was allegedly “designed to coerce the nurses into continuing their

employment”); see also Pollock v. Williams, 322 U.S. 4, 17-18 (1944) (explaining that the Thirteenth

Amendment was meant to maintain a system of “completely free and voluntary labor” and that “the right

to change employers” is the “defense against oppressive hours, pay, working conditions, or treatment”);

cf. FTC Non-Compete Clause Rule, 89 Fed. Reg. at 38,378-81 (finding that non-compete clauses

constitute an unfair method of competition in part due to their impact on employee mobility).

32 Federal law may prohibit charging employees for recruitment fees or other fees that can lead to debt

bondage, such as: payments for obtaining a visa; fees to cover the cost of soliciting, interviewing and

placing workers; fees for medical exams, immunizations and background checks; and costs of recruiters,

attorneys, notaries or other legal fees. Where a stay-or-pay arrangement involves such fees, the Region

should contact the Agency’s immigration team, who may also work with the Agency’s antitrafficking

coordinator, to assess whether the case is appropriate for referral to a government department or agency

that investigates such violations.

33 Where the repayment requirement appears to be for the purpose of recouping the cost of bestowed

benefits based on the contract language, but the surrounding circumstances undercut that legitimate

justification and demonstrate that the real purpose is to force employees to stay against their will, the

provision is unlawful without further analysis. Cf. Heartland, 2000 WL 303274, at *7.

ons.

33 Where the repayment requirement appears to be for the purpose of recouping the cost of bestowed

benefits based on the contract language, but the surrounding circumstances undercut that legitimate

justification and demonstrate that the real purpose is to force employees to stay against their will, the

provision is unlawful without further analysis. Cf. Heartland, 2000 WL 303274, at *7.

9

and (4) does not require repayment if the employee is terminated without cause. This

allocation of burdens is “consistent with ordinary evidentiary principles that take into

account which party has better access to the information that would prove or disprove

an argument.”34

Voluntarily entered into in exchange for a benefit: In order to minimize any

infringement on employee rights, entering into a stay-or-pay provision must be fully

voluntary—meaning that employees must be permitted to freely choose whether to do

so and may not suffer an undue financial loss or adverse employment consequence if

they decline—and must be in exchange for a benefit conferred on the employee.35

Ensuring that employees choose, of their own free will, to enter into such provisions is

essential to minimizing any interference with Section 7 rights.36 If a stay-or-pay

arrangement is optional, employees who are worried about retaliation for engaging in

protected activity may opt not to enter into such an arrangement, thereby allowing them

to exercise their statutory rights as freely as any other employee. In contrast, if

employment is conditioned on a stay-or-pay arrangement, employees have no ability to

preserve their Section 7 rights in this manner.

Training repayment agreements with a stay-or-pay provision satisfy this proposed

criterion so long as the training is optional

r into such an arrangement, thereby allowing them

to exercise their statutory rights as freely as any other employee. In contrast, if

employment is conditioned on a stay-or-pay arrangement, employees have no ability to

preserve their Section 7 rights in this manner.

Training repayment agreements with a stay-or-pay provision satisfy this proposed

criterion so long as the training is optional. In many cases, an employer offers to pay for

training or educational opportunities that an employee voluntarily elects to pursue with

the understanding that the employee will “pay” costs back through continued employment

for a given time period instead of paying for the program out of their own pocket (and

repay the employer if the employee does not stay for the requisite period).37 Where an

34 Total Security Management Illinois 1, LLC, 364 NLRB 1532, 1546 n.41 (2016), overruled on other

grounds by 800 River Road Operating Company, LLC d/b/a Care One at New Milford, 369 NLRB No. 109

(2020), enforced mem., 848 F. App’x 443 (D.C. Cir. 2021).

35 Although benefits conferred in exchange for the stay requirement are typically listed in a stay-or-pay

provision, in some cases it may be difficult to discern whether the repayment obligation is limited to such

benefits, especially where foreign workers are concerned. Certain visa programs provide that recruitment

fees are not to be borne by the employee. See U.S. Dep’t of Labor, Recruitment,

https://www.dol.gov/general/migrantworker/recruitment (migrant workers may not bear the cost of

recruitment fees). On the other hand, some visa programs require the employer to provide items

employees are normally responsible for, such as housing and transportation. Id. (under the H-2A visa

program, employers are required to provide free housing and transportation to the job)

bor, Recruitment,

https://www.dol.gov/general/migrantworker/recruitment (migrant workers may not bear the cost of

recruitment fees). On the other hand, some visa programs require the employer to provide items

employees are normally responsible for, such as housing and transportation. Id. (under the H-2A visa

program, employers are required to provide free housing and transportation to the job). Thus, where a

stay-or-pay arrangement covers a foreign worker, it may be necessary to scrutinize the repayment

requirement to ensure it is limited to conferred benefits, i.e., payment of expenses on behalf of the

employee that are legitimately borne by the employee (or an advance to the employee to cover such

expenses), and does not represent an attempt to shift a business expense to the employee as a penalty

or fee for separating.

36 Cf. Pattern Makers' League of N. Am. v. NLRB, 473 U.S. 95, 104 (1985) (observing that employees’

freedom to escape a union rule through resignation was “critical” to Court’s finding that the rule did not

restrain or coerce employees within the meaning of Section 8(b)(1)(A) in Scofield v. NLRB, 394 U.S. 423,

430 (1969)).

37 While rare, there may be other examples of truly optional benefits besides training or education funding

that employers offer in exchange for an employee agreeing to work for the employer for a set period of

time. For example, the federal government provides employees with optional paid parental leave of 12

weeks in the event of a birth or adoption placement, with the understanding that the employee will return

to employment for at least 12 weeks. See Sarah Donovan, Cong. Research Serv., The Federal Employee

Paid Parental Leave Benefit (March 5, 2024), available at

employer for a set period of

time. For example, the federal government provides employees with optional paid parental leave of 12

weeks in the event of a birth or adoption placement, with the understanding that the employee will return

to employment for at least 12 weeks. See Sarah Donovan, Cong. Research Serv., The Federal Employee

Paid Parental Leave Benefit (March 5, 2024), available at

10

employee can decline that opportunity without losing their job (or suffering other adverse

consequences at work), the employee is not being forced to enter into a stay-or-pay

arrangement. For example, if an employee needs a certain credential to be eligible for

promotion, a stay-or-pay arrangement to finance that undertaking would be permissible.

Likewise, subsidies covering the cost of classes or courses necessary to obtain or

maintain a mandatory credential for an employee’s current job, such as a degree, license,

or certification (“credential”), may be conditioned on a stay-or-pay provision if the classes

are selected at the employee’s discretion from any third-party vendor, that is, the

employee is not forced to take the classes through the employer. A stay-or-pay is

voluntary in such situations because an employee could pay out of pocket in lieu of

entering into a stay-or-pay arrangement. Doing so would amount to a justifiable financial

burden since employees expect to bear such costs to gain and keep a credential that is

portable to other jobs within the industry, and they can shop around based on price.

Additionally, where educational degrees are concerned, employees typically have other

financing options beyond becoming indebted to their employer and, thus, employees

would not be compelled to accept a stay-or-pay to fund their educational pursuits

pect to bear such costs to gain and keep a credential that is

portable to other jobs within the industry, and they can shop around based on price.

Additionally, where educational degrees are concerned, employees typically have other

financing options beyond becoming indebted to their employer and, thus, employees

would not be compelled to accept a stay-or-pay to fund their educational pursuits. While

not strictly required, it would be advisable to make the voluntary nature of the arrangement

explicit in the contract, e.g., by stating that the training or credential is not mandatory or

that the employee has the option of obtaining a mandatory credential from a third-party

vendor instead of via the employer.

In contrast, a stay-or-pay arrangement that is tied to mandatory training—that is,

orientation sessions, on-the-job training or other specific instruction that the employer

requires an employee to attend—cannot satisfy this proposed criterion. In practice,

employees are typically given no choice as to whether to enter into stay-or-pay

agreements in exchange for training their employer mandates. The only way to inject

“choice” into such an arrangement is to give employees the option of paying for the

mandatory employer-specific, employer-provided or employer-arranged training upfront

instead of entering a stay-or-pay—a choice that would be illusory. Employees would

have no ability to “shop around” for more economical offerings and, even if they could,

many would not be able to afford such payments because outside financing options for

these trainings are considerably more limited, if they exist at all, as compared to more

traditional educational opportunities. Thus, if given the choice of entering into a stay-or-

pay provision or paying out of pocket, often the only financially viable course of action

would be to sign up for the stay-or-pay

many would not be able to afford such payments because outside financing options for

these trainings are considerably more limited, if they exist at all, as compared to more

traditional educational opportunities. Thus, if given the choice of entering into a stay-or-

pay provision or paying out of pocket, often the only financially viable course of action

would be to sign up for the stay-or-pay. Moreover, even if the employee could afford to

pay, they would suffer a significant financial loss and would be at a financial

disadvantage compared to their coworkers if they declined the stay-or-pay. Virtually no

employee would elect to be put in that position. And any who did would effectively be

paying their employer for the privilege of remaining debt-free in order to more freely

engage in union and protected concerted activity, an outcome that cannot be squared

with the Act.38 Accordingly, a stay-or-pay arrangement cannot be truly voluntary when

https://crsreports.congress.gov/product/details?prodcode=IF12420. If the employee does not return to

employment for the given period, the agency may recoup the cost of insurance premiums paid on behalf

of the employee during their parental leave—notably, a sum significantly less than the total cost of the

paid leave itself. Id.

38 In contrast, employees who have the option of obtaining credential-related training through third-party

vendors, rather than through their employer, are not forced to pay their employer for the privilege of

preserving their Section 7 rights since they could opt to pay a vendor instead.

their parental leave—notably, a sum significantly less than the total cost of the

paid leave itself. Id.

38 In contrast, employees who have the option of obtaining credential-related training through third-party

vendors, rather than through their employer, are not forced to pay their employer for the privilege of

preserving their Section 7 rights since they could opt to pay a vendor instead.

11

tied to mandatory training provided by or arranged through the employer. Moreover,

underwriting the cost of mandatory training cannot be said to be a true “benefit” to

employees in the same way as financial assistance for optional training or portable

credentials. Mandatory trainings predominantly benefit the employer rather than

employees by ensuring the workforce has the necessary skills to perform their jobs.

While some trainings might involve general skill development that could be portable to

another job, that objective is often overshadowed by learning other competencies that

are non-transferrable.39 In these latter circumstances, the repayment requirement is

effectively an attempt to recoup the employer’s cost of doing business from employees’

pockets, which is not a legitimate employer interest, rather than a true recovery of

benefits conferred on an employee that are transferable. For all these reasons, stay-or-

pay provisions tied to mandatory training fail this aspect of the proposed test.

With respect to cash payments, such as a relocation stipend or sign-on bonus, in

my view a stay-or-pay provision can only be considered fully voluntary if employees are

given the option between taking an up-front payment subject to a stay-or-pay or deferring

receipt of the same bonus until the end of the same time period. Only in this way can

employees who anticipate possibly engaging in protected concerted activity avoid

becoming indebted to their employer without a significant financial downside

vision can only be considered fully voluntary if employees are

given the option between taking an up-front payment subject to a stay-or-pay or deferring

receipt of the same bonus until the end of the same time period. Only in this way can

employees who anticipate possibly engaging in protected concerted activity avoid

becoming indebted to their employer without a significant financial downside. If the only

alternative was to decline the cash payment outright, that “choice” would be illusory

because no reasonable employee would do so, and if they did, it would amount to paying

their employer in order to safeguard their Section 7 rights by foregoing money that will

remain in the employer’s account.

In short, it is my position that where a stay-or-pay arrangement is fully voluntary

and tied to a conferred benefit in the ways discussed above, it does not unduly infringe

on employees’ Section 7 rights so long as it satisfies the additional criteria discussed

below.

A reasonable and specific repayment amount: In order to be lawful, the

repayment amount must be reasonable, that is, no more than the cost to the employer

of the benefit bestowed, and the debt amount must be specified up front. Where the

repayment amount is greater than the cost to the employer, the true purpose of the

provision is no longer legitimate recoupment but rather coercive restriction of employee

mobility, which, as noted above, is not a legitimate business interest. Further, where the

employer sets the debt repayment amount above the benefit’s cost, that can exacerbate

the coercive effect of the provision by making it that much harder for an employee to

repay the debt if they switch jobs or contemplate engaging in protected activities that

39 See, e.g., Kaiser-Schatzlein, supra note 16 ("if a company pays for a transferable credential, like an

M.B.A

t. Further, where the

employer sets the debt repayment amount above the benefit’s cost, that can exacerbate

the coercive effect of the provision by making it that much harder for an employee to

repay the debt if they switch jobs or contemplate engaging in protected activities that

39 See, e.g., Kaiser-Schatzlein, supra note 16 ("if a company pays for a transferable credential, like an

M.B.A. or a master’s degree in computer programming, it might make sense to require the employee to

stay for a set amount of time” but “too often the training is little more than orientation and provides no

transferable credentials”); Jonathan F. Harris, Unconscionability in Contracting for Worker Training, 72

ALA. L. REV. 723, 724 (2021) (noting that TRAPs tied to on-the-job training “often constrain employee

mobility without providing employees the portable skills needed for quality jobs”); Consumer Fin. Prot.

Bureau, supra note 16 (in certain sectors, employees “who have already completed all training necessary

to perform the job and required by licensing authorities” are often required to sign stay-or-pay provisions

for mandatory training programs; “some firm-specific trainings may have greatly inflated valuations, with

little to no actual value for the worker despite the high costs charged”).

12

might jeopardize their job security. To satisfy the specificity requirement, the employee

must be informed of the repayment amount before assuming the stay requirement

required to sign stay-or-pay provisions

for mandatory training programs; “some firm-specific trainings may have greatly inflated valuations, with

little to no actual value for the worker despite the high costs charged”).

12

might jeopardize their job security. To satisfy the specificity requirement, the employee

must be informed of the repayment amount before assuming the stay requirement. In

the case of cash payments or advances, the amount must be stated in the stay-or-pay

contract; where other types of benefits are concerned, the amount must at least be

disclosed before the employee accepts the benefit subject to a stay requirement.40 This

ensures that employees enter into stay-or-pay arrangements with informed consent,

knowing how much the debt will be if they separate from employment before the end of

the stay period.41 Without such specificity, employees cannot make an informed decision

about whether to enter into the stay-or-pay arrangement. In addition, not knowing the

exact amount of debt owed to the employer if an employee separates prematurely may

heighten an employee’s fear of retaliation for engaging in Section 7 activities because

they may imagine it to be a larger sum than it actually is.

A reasonable “stay” period: In addition, the “stay” period associated with the

stay-or-pay provision must be reasonable. Such a determination will be fact-specific

based on factors such as the cost of the benefit bestowed, its value to the employee,42

whether the repayment amount decreases over the course of the stay period,43 and the

employee’s income. Where the cost of the benefit is greater, the stay period may be

longer, whereas lower-cost benefits should be associated with shorter stay periods

e reasonable. Such a determination will be fact-specific

based on factors such as the cost of the benefit bestowed, its value to the employee,42

whether the repayment amount decreases over the course of the stay period,43 and the

employee’s income. Where the cost of the benefit is greater, the stay period may be

longer, whereas lower-cost benefits should be associated with shorter stay periods. In

my view, ensuring that the stay period is reasonable under the circumstances reduces

the coercive effect of the provision by ensuring that the period of time an employee must

stay, and potentially be chilled from engaging in Section 7 activity, is not unduly long and

is proportional to the benefit bestowed.

No repayment required if terminated without cause: Finally, the provision

must effectively state that the debt will not come due if the employee is terminated

without cause. A stay-or-pay provision that permits the employer to recoup a debt if it

40 For example, a stay-or-pay contract may specify that the employer will pay for voluntary training on the

employee’s behalf and the debt will be forgiven at certain percentages over time, without specifying

exactly how much the total training cost will be. As long as the employee is aware of the cost of each

training before they decide whether to enroll and are reminded that enrollment will subject them to a stay

requirement, this is sufficient to provide the employee notice of the amount of their debt obligation to

make an informed decision about whether they wish to become indebted to their employer subject to the

stay-or-pay requirement. Likewise, a stay-or-pay contract may state that the employer will arrange and

pay for their relocation, but an employee must be given an estimate of the relocation costs and be

reminded that acceptance will trigger a stay requirement before they accept the employer’s assistance.

41 Consumer Fin. Prot

hether they wish to become indebted to their employer subject to the

stay-or-pay requirement. Likewise, a stay-or-pay contract may state that the employer will arrange and

pay for their relocation, but an employee must be given an estimate of the relocation costs and be

reminded that acceptance will trigger a stay requirement before they accept the employer’s assistance.

41 Consumer Fin. Prot. Bureau, supra note 16 (“there is a risk that employees may be rushed into signing

agreements that hide the details of the debt workers are agreeing to”; “many workers [are] unsure of the

exact amount they owe”).

42 See Harris, supra note 39 at 754 (arguing for applying the doctrine of unconscionability to training

repayment agreements and urging courts to consider the value of the training provided, i.e., “whether the

employee received any benefit from the training, such as portable skills,” in conducting such analysis).

43 While an employer is not required to prorate the amount the employee must repay on a monthly or

quarterly basis over the course of the stay period, doing so will weigh in favor of the reasonableness of

the stay period. Thus, for example, where a one-year stay period might otherwise seem somewhat

unreasonable under the other factors listed, if the repayment amount declines by 25% every quarter, that

could be enough to make the stay period reasonable under the Act. Cf. Harris, supra note 39 at 728

(arguing that “whether the TRA[P] repayment amount is amortized—that is, decreases over the time

employed” should be one factor courts consider in applying the doctrine of unconscionability to such

provisions).

the other factors listed, if the repayment amount declines by 25% every quarter, that

could be enough to make the stay period reasonable under the Act. Cf. Harris, supra note 39 at 728

(arguing that “whether the TRA[P] repayment amount is amortized—that is, decreases over the time

employed” should be one factor courts consider in applying the doctrine of unconscionability to such

provisions).

13

terminates the employee for any reason whatsoever, which would include a basis

prohibited by the Act, is unlawfully coercive. Indeed, an employee who knows they have

a debt that will come due if they are fired without cause, which could include termination

for an unlawful reason, will have an even greater fear of engaging in union activity and

other concerted advocacy for improved working conditions. Given that termination for

engaging in activity protected by the Act is, by law, termination without cause,44 I believe

this limitation is essential to ensure stay-or-pay provisions are narrowly tailored to

minimize interference with Section 7 rights.

Remedying the Effects of Unlawful Stay-or-Pay Provisions

Where a stay-or-pay arrangement was voluntarily entered into, with informed

consent, in exchange for a benefit, but the provision violates the Act because it is not

otherwise narrowly tailored in one or more ways discussed above, the employer should

be ordered only to rescind and replace it with a lawful provision, as well as undertake

other remedies as further discussed herein.45 For example, if the repayment amount and

stay period are reasonable, but payment was required even if an employee was

terminated without cause, the employer must modify that aspect of the agreement to

remedy the chilling effect such a repayment requirement has on Section 7 activity.

Likewise, if the repayment amount is greater than the cost of the benefit or the stay

period is unreasonably long, the employer must modify those terms to make them

reasonable

ble, but payment was required even if an employee was

terminated without cause, the employer must modify that aspect of the agreement to

remedy the chilling effect such a repayment requirement has on Section 7 activity.

Likewise, if the repayment amount is greater than the cost of the benefit or the stay

period is unreasonably long, the employer must modify those terms to make them

reasonable.

The proffer or maintenance of non-voluntary stay-or-pay arrangements requires

a more robust remedy and, as discussed in the next section, I will decline to issue

complaint as to certain preexisting stay-or-pay arrangements, even if they were not

voluntary. Otherwise, however, where an employer proffers or maintains a stay-or-pay

provision that is not voluntary (or is offered without disclosing the debt amount), I will

encourage the Board to remedy the provision’s harmful effects by requiring that the

employer rescind the provision and notify employees that the “stay” obligation has been

eliminated and that any debt has been nullified and will not be enforced against them.

Where an employee is indebted to their employer for mandatory training, the only way

to put the employee back in the position they would have been in but for the unfair labor

practice is to erase the debt.46 Likewise, where an employee was not given a choice to

defer payout of a bonus or relocation subsidy until the end of the stay period, the

employer should be ordered to eliminate the repayment obligation, without unwinding

the cash payment so that the employee is not harmed financially by the employer’s

misstep. Similarly, if an employee agreed to a stay-or-pay provision without any notice

as to the amount of the repayment obligation, the stay-or-pay obligation must be

rescinded because it cannot be said that the employee voluntarily accepted the stay-or-

pay with informed consent. Only in this manner can the Board remedy the coercive

44 See NLRB v. Transp. Mgmt. Corp., 462 U.S

e employer’s

misstep. Similarly, if an employee agreed to a stay-or-pay provision without any notice

as to the amount of the repayment obligation, the stay-or-pay obligation must be

rescinded because it cannot be said that the employee voluntarily accepted the stay-or-

pay with informed consent. Only in this manner can the Board remedy the coercive

44 See NLRB v. Transp. Mgmt. Corp., 462 U.S. 393, 401 n.6 (1983) (noting that, in drafting Section 10(c),

Congress attempted to distinguish between those discharges that were “for cause” and those that were

imposed “as punishment for protected activity”).

45 See Prime Healthcare Paradise Valley, LLC, 368 NLRB No. 10, slip op. at 7-8 (2019) (ordering

employer to rescind arbitration agreement or else revise it “to make clear to employees that it does not

bar or restrict their right to file charges with the Board”).

46 See Franks, 424 US. at 769; J.H. Rutter-Rex, 396 U.S. at 263.

14

nature of stay-or-pay arrangements that are entered into involuntarily and ensure that

employees can opt out of such arrangements if they so choose.

Where an employer has attempted to enforce an unlawful stay-or-pay agreement,

except in extenuating circumstances, the employer should be required to retract the

enforcement action and make employees whole for any financial harms resulting from

its attempted enforcement.47 Thus, for example, where an employer has demanded

payment in reliance on the terms of an unlawful stay-or-pay provision, and the employee

complied, the employer must compensate the employee for any repayments made.

Where an employer attempts to collect the purported debt, either through legal action or

by sending it to a collections agency, in addition to retracting the action and notifying all

necessary parties that the debt has been nullified, the employer must also compensate

the employee for any legal or other fees associated with defending against the

employer’s action

oyee for any repayments made.

Where an employer attempts to collect the purported debt, either through legal action or

by sending it to a collections agency, in addition to retracting the action and notifying all

necessary parties that the debt has been nullified, the employer must also compensate

the employee for any legal or other fees associated with defending against the

employer’s action. Where an employee can show that they experienced other financial

harm as a direct or foreseeable result of the stay-or-pay provision, such as where their

credit rating was impacted by any attempted enforcement,48 which adversely affected

the employee’s ability to secure new employment or the terms of a loan taken out by the

employee, the employer should be required to take steps to correct the credit rating and

compensate the employee for any pecuniary harms.49

Finally, as with non-compete provisions, employees must have the opportunity to

come forward and demonstrate that they were deprived of better employment

opportunities since the start of the Section 10(b) period as a result of the unlawful stay-

or-pay provision. While non-compete provisions restrict employee mobility directly, stay-

or-pay provisions do so indirectly by making resignation financially difficult or untenable.

In either case, the effect is the same—employees who are discouraged from pursuing

or accepting a better job as a result of an unlawful provision are worse off financially as

a result of the employer’s unfair labor practice. Accordingly, the employer must

compensate employees subject to a stay-or-pay provision for that difference (in terms of

pay or benefits) where an employee can show that: (1) there was a vacancy available

for a job with a better compensation package; (2) they were qualified for the job; and (3)

they were discouraged from applying for or accepting the job because of the stay-or-pay

provision

e. Accordingly, the employer must

compensate employees subject to a stay-or-pay provision for that difference (in terms of

pay or benefits) where an employee can show that: (1) there was a vacancy available

for a job with a better compensation package; (2) they were qualified for the job; and (3)

they were discouraged from applying for or accepting the job because of the stay-or-pay

provision.

47 For cases involving unlawful employment rules or contract terms, I have argued that the Board should

remedy enforcement actions where the employer targeted employee conduct that “touches the concerns

animating Section 7.” See United Wholesale Mortgage, Case 07-CA-297897, General Counsel’s Brief in

Support of Exceptions, filed March 18, 2024; Memorandum GC 24-04, Securing Full Remedies for All

Victims of Unlawful Conduct, dated April 8, 2024. However, stay-or-pay provisions are debt arrangements

and, thus, they are distinct from most other unlawful employer rules or contract terms in that their purpose

is not to regulate employee conduct. Accordingly, a “touches the concerns” analysis is not necessary, and

employers should be required to unwind any enforcement actions taken pursuant to any unlawful stay-or-

pay provision.

48 See Gibson, supra note 19 (noting employee’s credit score fell as a result of employer’s attempt to

collect on a training repayment provision); Consumer Fin. Prot. Bureau, supra note 16 (“Employer-driven

debts may have a derogatory effect on workers’ credit reports and, in turn, impede their ability to obtain

other financial products that require credit checks, or a new job with a company that requires a credit

check as a precondition to employment.).

49 See Thryv, Inc., 372 NLRB No. 22, slip op. at 6 (2022), enforcement denied in part on other grounds,

102 F.4th 727 (5th Cir. 2024).

driven

debts may have a derogatory effect on workers’ credit reports and, in turn, impede their ability to obtain

other financial products that require credit checks, or a new job with a company that requires a credit

check as a precondition to employment.).

49 See Thryv, Inc., 372 NLRB No. 22, slip op. at 6 (2022), enforcement denied in part on other grounds,

102 F.4th 727 (5th Cir. 2024).

15

To assist the Regional offices with ensuring employees are fully compensated for

these types of harms, as discussed in Part I, I recommend that the Board amend its

standard notice posting to solicit relevant information from employees.50 In this regard,

the notice should: (1) alert employees that they may be entitled to a differential (in terms

of wages or benefits) if they were discouraged from pursuing, or were unable to accept,

other job opportunities due to the unlawful stay-or-pay provision; (2) notify employees

that they may be entitled to other compensation if they separated from employment and

had difficulty securing new employment due to the unlawful stay-or-pay provision, such

as where a new employer declined to hire them due to a lowered credit score tied to

unpaid debt to the employer; and (3) include language directing individuals to contact

the Regional office during the notice-posting period if they have evidence related to (1)

or (2). Furthermore, in every case, the Board should order mailing of the notice to ensure

that current employees, as well as former employees who were subject to a stay-or-pay

provision since the start of the Section 10(b) period, have an opportunity to read the

notice and take steps during the notice-posting period to obtain relief, if appropriate.

Exercise of Prosecutorial Discretion

In recognition of the fact that this proposed framework contains new, specific

requirements, I will exercise my prosecutorial discretion to decline to issue complaint,

absent settlement, in certain circumstances

ection 10(b) period, have an opportunity to read the

notice and take steps during the notice-posting period to obtain relief, if appropriate.

Exercise of Prosecutorial Discretion

In recognition of the fact that this proposed framework contains new, specific

requirements, I will exercise my prosecutorial discretion to decline to issue complaint,

absent settlement, in certain circumstances. Thus, I will grant employers a sixty-day

window from the date of issuance of this memorandum to cure any preexisting stay-or-

pay provisions that advance a legitimate business interest. For example, if a stay-or-pay

arrangement includes a repayment amount that is more than the cost of the benefit

bestowed, the employer should reduce it to a level that is no higher than that cost and

notify affected employees of the new repayment amount. Likewise, if a stay period is

unreasonably long, the employer should shorten it to a reasonable length and notify

impacted employees of the new stay period. And if the stay-or-pay provision requires

repayment in the event an employee is terminated without cause, the employer should

amend the provision to make clear that it does not cover no-cause termination and so

notify employees. If an employer cures any such defects in this manner prior to the sixty-

day deadline, such that any remaining debt satisfies the test set forth above, I will decline

to issue complaint, absent settlement. Likewise, if a debt collection enforcement action

(e.g

thout cause, the employer should

amend the provision to make clear that it does not cover no-cause termination and so

notify employees. If an employer cures any such defects in this manner prior to the sixty-

day deadline, such that any remaining debt satisfies the test set forth above, I will decline

to issue complaint, absent settlement. Likewise, if a debt collection enforcement action

(e.g. through a collections agency, lawsuit, or arbitral proceeding) is still pending when

this memorandum issues, the employer should modify its demand for repayment within

sixty days so as to comply with this test, for example, by: reducing the repayment

demand so that it is no higher than the cost of the benefits; seeking dismissal of a claim

if the stay period was unreasonably long and the employee stayed for a reasonable

period of time; or seeking dismissal if the provision did not have a carve out for

discharges without cause and the employee was, in fact, terminated without cause.

50 This aligns with the similar procedure I recommended in United Wholesale Mortgage, Case 07-CA-

297897, brief to the Board filed March 18, 2024, regarding discipline or enforcement of unlawful rules or

contract terms. Regions should pursue changes to the notice posting consistent with that guidance with

respect to all the unlawful rules (including language alerting employees that they may be entitled to a

remedy if they were subject to legal enforcement under an unlawful provision) as well as the modifications

discussed above that are specific to a stay-or-pay provision.

f unlawful rules or

contract terms. Regions should pursue changes to the notice posting consistent with that guidance with

respect to all the unlawful rules (including language alerting employees that they may be entitled to a

remedy if they were subject to legal enforcement under an unlawful provision) as well as the modifications

discussed above that are specific to a stay-or-pay provision.

16

In some circumstances, it will not be possible for an employer to unwind an

unlawful stay-or-pay provision to conform to the proposed test. Such a problem is

presented where the stay-or-pay provision was not entered into voluntarily (or with

informed consent as to the amount) as well as where the enforcement action has already

closed. Since the inequities flowing from cancelling a debt are greater where employees

received a tangible, transferrable benefit, I will also exercise my prosecutorial discretion

by declining to pursue cases where the preexisting stay-or-pay arrangement involved

such benefits—e.g., an upfront cash payment such as a bonus or relocation stipend,

financial assistance towards optional training, or payment for classes to obtain or

maintain a credential—so long as the other three requirements discussed above are

cured by the end of the sixty day window. Thus, even though a cash payment or

credential-conferring training may not have been fully voluntary as defined above, I will

not issue complaint as to a preexisting arrangement if any issues relating to the stay

period, repayment amount, or repayment trigger, are cured. Likewise, and again

assuming all other issues are cured, where an employee was not informed of the exact

amount of the debt for optional training or credential-related classes, I will not pursue a

complaint against such a preexisting arrangement so long as the employer discloses the

debt amount to the employee within sixty days

e stay

period, repayment amount, or repayment trigger, are cured. Likewise, and again

assuming all other issues are cured, where an employee was not informed of the exact

amount of the debt for optional training or credential-related classes, I will not pursue a

complaint against such a preexisting arrangement so long as the employer discloses the

debt amount to the employee within sixty days. Where an employer has already enforced

a stay-or-pay agreement entered into prior to this memorandum that was in exchange

for the types of benefits contemplated here (cash payments, payments toward optional

training or any credentialing), I will not litigate the unlawfulness of such enforcement so

long as the amount being sought is reasonable, in accordance with the above analysis.

Finally, I will decline to prosecute any preexisting stay-or-pay arrangement if the

employer cancels the debt, notifies employees that they no longer have a repayment

obligation, retracts any debt collection enforcement action and, if appropriate, returns

any repayments collected from employees within sixty days of this memorandum.

In all other respects, I intend to prosecute preexisting stay-or-pay arrangements

that fail the test set forth herein and seek retroactive application, absent extenuating

circumstances.51 I also intend to issue complaint, absent settlement, over the proffer,

maintenance, or enforcement of any unlawful stay-or-pay arrangement that is entered

into after issuance of this memorandum, without a sixty-day reprieve.52

I recognize that both employers and employees can benefit from certain training

repayment provisions and other stay-or-pay arrangements. However, given the serious

51 See, e.g., SNE Enterprises, 344 NLRB 673, 673 (2005) (stating that the Board’s usual practice is to

apply new policies and standards retroactively “to all pending cases in whatever stage” so long as doing

so “would not result in “manifest injustice”); see also Williams Natural Gas Co. v

om certain training

repayment provisions and other stay-or-pay arrangements. However, given the serious

51 See, e.g., SNE Enterprises, 344 NLRB 673, 673 (2005) (stating that the Board’s usual practice is to

apply new policies and standards retroactively “to all pending cases in whatever stage” so long as doing

so “would not result in “manifest injustice”); see also Williams Natural Gas Co. v. F.E.R.C., 3 F.3d 1544,

1554 (D.C. Cir. 1993) (explaining that retroactivity is “natural, normal, and necessary” where agency

ruling concerns a matter of first impression and observing that the D.C. Circuit has “repeatedly held that

retroactivity is appropriate when the agency’s ruling represents a ‘new policy for a new situation,’ rather

than being ‘a departure from a clear prior policy’” (quoting Aliceville Hydro Assocs. v. F.E.R.C., 800 F.2d

1147, 1152 (D.C. Cir. 1986), and New England Tel. & Tel. Co. v. F.C.C., 826 F.2d 1101, 1110 (D.C. Cir.

1987))).

52 Of course, where an employee was unlawfully discharged under the Act and was thereafter subject to

the repayment requirements of a stay-or-pay provision, I will encourage the Board to fully remedy any

related financial harms. Regardless of the legality of the stay-or-pay provision or the date it was entered,

the employee should not have been terminated and accordingly should not have been subject to the stay-

or-pay provision’s repayment requirement.

17

potential for suppressing union organizing and other concerted activity for mutual aid or

protection, including by impairing job mobility, I believe such provisions must be narrowly

tailored to minimize that infringement on Section 7 rights in order to respect the

rebalance of “economic power between labor and management” Congress sought in

passing the Act.53

Should Regions have questions about the application of this framework to a

particular case or encounter a case involving enforcement of a stay-or-pay arrangement,

they should contact the Division of Advice.

/s/

J.A.A

minimize that infringement on Section 7 rights in order to respect the

rebalance of “economic power between labor and management” Congress sought in

passing the Act.53

Should Regions have questions about the application of this framework to a

particular case or encounter a case involving enforcement of a stay-or-pay arrangement,

they should contact the Division of Advice.

/s/

J.A.A.

53 Am. Ship Bldg. Co. v. NLRB, 380 U.S. 300, 317 (1965).