The Biden administration plans to crack down on employer-mandated training reimbursement agreements that can saddle workers with thousands of dollars in debt when they leave their jobs.
Employment contracts that require workers to stay with a company for a certain period of time or pay the cost of their job training are increasingly viewed as predatory and anti-competitive by the Consumer Financial Protection Bureau and other agencies.
The increased attention is part of a broader push to boost competition in the labor market following President Joe Biden’s July 2021 executive order directing federal agencies to promote a “fair and open marketplace.”
Employers face potential new restrictions on how they structure job training reimbursement provisions as advocates push the Biden administration for greater scrutiny of provisions when handing out federal job training grants . The CFPB – a consumer watchdog largely unknown outside the financial sector – also has the power to take aggressive enforcement action against all types of employers.
“Just because these are agreements between employers and employees doesn’t take anything away from the consumer realm,” said Eric Fink, professor of labor and employment law at Elon Law School.
Although the Department of Labor may seem like the natural choice to accept training reimbursement agreements, the CFPB is poised to play a prominent role due to its oversight of consumer financial laws and collection practices. of receivables. The Federal Trade Commission, which has both consumer protection and competition mandates, is also well placed to crack down on the practice.
Reduced earning power
Training reimbursement programs can prevent workers from seeking better-paying work, which “reduces their bargaining and earning power,” the Treasury Department said in a March report on “The State of Competitiveness.” in the labor market”.
CFPB Director Rohit Chopra echoed similar sentiments at an April 4 competition enforcement conference hosted by the FTC and the Department of Justice. Workers are being barred from seeking new job opportunities because of the “potentially large balloon payment they could face” in their current jobs, he said.
A March 9 CFPB blog highlighted a “large retailer” where employees looking to become specialists must pay between $500 and $5,000 if they leave or are fired within two years of the end of the contract. training.
A fully licensed nurse told the CFPB that a health care company required employees to take a mandatory in-company training course that required payment of $10,000 if they were not working full-time for the company.
The CFPB will closely examine training-related debts “and their collection by employers and third-party debt collectors” for potential violations of federal consumer protection laws, the office said in the blog post.
Nurses request powered tube
The CPFB is not alone. Advocacy groups and at least one union have been pushing the FTC and state regulators to investigate and suspend training reimbursement agreements for some time.
The National Nurses Union, which represents 175,000 American workers, raised concerns with the FTC in August 2021 that workers would face lump sum reimbursements for training programs if they wanted to leave early.
Carmen Comsti, senior regulatory policy specialist at the California Nurses Association, an affiliate of the NNU, said the programs did not provide nurses with new skills, but were mainly orientation sessions to acclimate them to the facility. .
At least one state has decided to restrict the use of training reimbursement agreements. California passed a law in 2020 requiring state employers to cover the costs of employer-mandated training for workers who provide direct patient care at certain hospitals. The NNU urged the FTC to consider adopting the law as a national model.
Education reimbursement agreements are a “win-win for patients and nurses,” American Hospital Federation President and CEO Chip Kahn said in a statement.
“Patients receive quality care at the bedside, while nurses pursue their careers and practice at the peak of their licenses,” he said.
One of the hospital operators named in the NNU comment letter, MedStar Health, says it has not sought reimbursement for nurse training in ‘many years’, despite having the power to to do so under a collectively negotiated contract.
“MedStar Health and all of our hospitals are fully committed to supporting the professional development and growth of our nurses,” So Young Pak, director of media relations, communications and public affairs at MedStar Health, said in a statement.
Comsti and others have called on the Biden administration to attach language to job training grants and other funding opportunities that would explicitly prohibit training reimbursement agreements, among other solutions.
“We would like the administration to use all the tools at their disposal to prevent the use of these types of contracts,” Comsti said.
The Department of Labor, which helped produce the Treasury report, would have jurisdiction primarily through state-funded workforce programs authorized by the Workforce Innovation and Opportunity Act. ‘work. But apart from these cases, the power of the agency is limited.
State-funded workforce programs authorized through the WIOA are the primary means through which the agency communicates its priorities to states and localities, while ensuring that funding funds go to high-quality programs,” Acting Jobs and Training Secretary Angela Hanks said in an interview.
The FTC may be a more natural solution for dealing with training reimbursement agreements beyond the reach of the Labor Department. The agency is already considering reforming and potentially restricting non-compete agreements, which employers use to prevent employees from leaving for competitors.
Critics say the training reimbursement agreements act as a kind of de facto non-competition, but without any specific restrictions on where a person can work.
“In some ways they are worse because they limit workers’ ability to leave for any job,” said Sandeep Vaheesan, legal director of the Open Markets Institute.
Any rule developed by the FTC will be sweeping and binding on all employers. But rule-making itself presents some risk, said Chris J. Willis, co-director of the consumer financial regulation practice at Troutman Pepper Hamilton Sanders LLP.
“When you make a rule, it’s very visible politically and it’s very easily challenged in court,” he said.
Discover the CFPB
For Chopra and other CFPB officials, training repayment agreement programs resemble student loans because they burden consumers with debt, said Jonathan Harris, a professor at Loyola Marymount Law School.
“Employers using these traps have, in doing so, chosen to wade into the jurisdiction of the CFPB,” Harris said.
The CFPB could require Truth in Lending Act disclosures and debt collection protections in training reimbursement agreements, said David Seligman, executive director of Toward Justice, a nonprofit law firm representing employees. .
The agency could find a faster solution by using broad enforcement powers against what it considers “unfair, deceptive and abusive acts and practices,” Seligman added.
“If these training reimbursement agreements are unreasonable and amount to unenforceable non-compete agreements, then they constitute an unfair practice. Then the CFPB could say the whole system is unfair and illegal,” he said.
The battle for enforcement would then be whether the CFPB has authority over agreements between employers and their workers, Willis said.
“Achieving employer-employee relations is probably well beyond anyone’s expectations of what the CFPB was designed to regulate,” he said.