# NLRB General Counsel Memorandum GC 25-01: GC 25-01 Remedying the Harmful Effects of Non-Compete and "Stay-or-Pay" Provisions that Violate the National Labor Relations Act

> Federal · Agency guidance · Rescinded

URL: https://www.frixlaw.com/law-library/statutes/NLRB_GCGC2501

## Section

- **Citation:** NLRB General Counsel Memorandum GC 25-01
- **Heading:** GC 25-01 Remedying the Harmful Effects of Non-Compete and "Stay-or-Pay" Provisions that Violate the National Labor Relations Act
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** Rescinded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** NLRB General Counsel Memoranda / GC 25-01 Remedying the Harmful Effects of Non-Compete and "Stay-or-Pay" Provisions that Violate the National Labor Relations Act

## Text

1
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))).

6

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

7

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).

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/NLRB_GCGC2501. Check the current official text before relying on it. Not legal advice.