What are traps and why do states ban them?

Training reimbursement agreement provisions, or TRAPs, are clauses in employment contracts that allow employers to bill workers for the cost of job training if they leave before a specified period. These reimbursement amounts can range from several thousand to tens of thousands of dollars, regardless of whether the training provided has lasting value to the employee.

investigation before Student Borrower Protection Center (SBPC) It found that major employers use TRAPs in industries that together employ more than a third of private sector workers. The report identified their growing presence in healthcare, trucking, retail and other service sectors.

The SBPC described these programs as part of the broader “shadow student debt” market – financial obligations similar to student loans but arising from employment contracts rather than traditional credit products. In many cases, workers are not fully informed of these provisions when they sign their job offers or training agreements.

Financial burden on workers

In practice, TRAPs often act as punishments for smoking cessation. Nurses in Texas have been billed for thousands of dollars To leave hospital positions before completing two-year commitments. Truck drivers reported their debts Up to $6,500 for retiring companies that advertised “free training” programs but provided little instruction or unsafe conditions. Pet groomers at major retail chains have faced requests for reimbursement Up to $5,000 for training programs promoted as free employment benefits.

Debt can haunt workers long after they leave. Some employers seek to collect debts through outside agencies, report debts to credit bureaus, or withhold final paychecks. Because these agreements are usually drafted by the employer, repayment terms can include high interest rates, legal fees, or administrative fees that can exceed the actual cost of the training.

This debt structure reduces workers’ ability to change jobs, negotiate higher wages, or report unsafe or discriminatory conditions. Researchers in Loyola Law School has found those traps They may have stronger deterrent effects on worker mobility than traditional non-compete clauses, because they impose a financial penalty rather than restricting their careers.

How TRAPs Effectively Replace Noncompete Agreements

Employers have increasingly turned to TRAPs as states tighten restrictions on non-compete clauses. While a non-compete prevents a worker from joining a competitor, TRAPs impose a financial barrier on leaving a job (you have to pay “training costs”).

The result is a labor market where employees may technically be free to change jobs but face heavy debt burdens if they do. Economists have linked such restrictions to lower wages and less competition among employers, especially in industries already characterized by high turnover.

How countries respond

Federal regulators began processing TRAPs and related noncompete agreements in the early 2020s. the FTC Noncompete Rule 2024 It sought to ban both types of restrictive employment conditions nationwide. Those efforts stalled in 2025 after the Federal Trade Commission withdrew its defense of the rule in court, leaving regulation largely to the states.

In response, several states have developed their own protective measures. this year, California lawmakers approved AB 692which would prohibit employers from using debt or threats of repayment to deter workers from leaving their jobs. The bill awaits Governor Gavin Newsom’s signature.

If passed, California will join the list of states that have taken similar measures. Those include New York, which passed Law trapped in action ban TRAPs statewide; Colorado, which banned hospitals and health care staffing companies from charging medical workers to leave; and Indiana, which limited residency or payment requirements in physician contracts. Wyoming, Nevada, Vermont, Massachusetts, Ohio, and Washington have also introduced or passed similar legislation.

Together, these state measures represent the broadest movement against TRAPs since they first became popular in the 1990s.

Industries most affected

health care It has seen one of the most widespread uses of TRAPs. Hospitals and staffing agencies required newly licensed nurses to sign contracts requiring them to stay for up to two years or pay thousands of dollars. The SBPC documented cases in which reimbursement requests ranged from $5,000 to $50,000, even when the training provided was basic orientation or introductory coursework.

in Transport sectorlarge trucking companies have relied on TRAPs to retain drivers. Workers who are hired with promises of free commercial driver’s license programs often discover after enrolling that leaving early leads to significant debt. Lawsuits against trucking companies have revealed that training fees charged to workers often exceed actual costs to the company by thousands of dollars.

Employers in retail and services They have also used TRAPs disguised as educational or training benefits. Pet retailers, fast food chains, and banks have offered “educational assistance” or “paid training” programs that later require repayment if the worker leaves within six to twelve months. These provisions have created situations where low-wage employees must continue working despite poor conditions to avoid new debt.

What workers can do

Employees considering new job offers need to review all documentation for reimbursement, reimbursement, or “training cost” items. State labor departments and legal aid organizations can help determine whether these agreements are enforceable under local law. Unions and worker advocacy groups are also pushing for “TRAP-free” provisions to be included in collective bargaining agreements.

Transparency requirements (such as mandatory disclosure of all training costs and pre-employment payment terms) can reduce the likelihood that workers will unknowingly incur work-related debt.

If California enacts AB 692, it would become the first state to pass new restrictions on TRAPs after the federal government withdrew from implementation.

The broader trend indicates a shift toward state-level governance regarding issues of workplace mobility and consumer debt. As more industries adopt repayment terms, regulators and legislators are seeking to ensure that job training does not become another path to long-term debt.

Don’t miss these other stories: