A stay-or-pay provision is a contractual clause in employment agreements that requires employees to remain with the company for a specified period or face financial penalties, typically requiring repayment of certain benefits or costs the employer initially covered.  These types of contracts can make you feel stuck in a job because of a contract. Maybe you signed something saying you would have to pay back a sign-on bonus or training costs if you left too soon. These are often part of what are called NLRB stay-or-pay provisions, and they are getting a lot of attention lately. It can feel like you are caught, especially if you want to move to a better job or your current workplace is not great. You are not alone in feeling this way; many workers face these agreements. The good news is that the rules around NLRB stay-or-pay provisions might be changing in ways that could help you.

Recently, the top lawyer for the National Labor Relations Board (NLRB), General Counsel Jennifer Abruzzo, put out a strong message. This message, through a gc memo, questioned if many of these stay-or-pay deals are actually legal. This could mean big changes for both employees and the companies they work for. You will learn what these provisions are, why they are under scrutiny, and what this new focus from the national labor relations board could mean for your rights at work.

Table of Contents:

• What Exactly Are Stay-or-Pay Provisions?
• The NLRB is Taking a Closer Look at NLRB Stay-or-Pay Provisions
• Why the NLRB Thinks These Agreements Might Be Illegal
• Are There Any Exceptions? The Proposed Test
• What About Existing Stay-or-Pay Agreements?
• What Happens if a Provision is Found Unlawful? (Make-Whole Remedies)
• Who Does This Affect? (Coverage Under the NLRA)
• What Does This Mean for You as an Employee?
• What Steps Can You Take?
• Conclusion

What Exactly Are Stay-or-Pay Provisions?

Stay-or-pay provisions are contractual obligations in employment agreements that require workers to financially compensate their employer if they depart before completing a predetermined service period, often applying to reimbursement of training expenses, relocation costs, or signing bonuses. Think of them as agreements where an employee commits to staying with a company for a set amount of time. If the employee leaves before that time is up, they have to pay money back to the employer. This money could be for various things the employer says they spent on you, creating a significant financial burden if you choose to leave earlier than the agreed employment period.

You might see them called different names. Some common examples include Training Repayment Agreement Provisions, often called TRAPs. Others are sign-on bonuses or relocation bonuses that you have to repay if you do not stay long enough. Relocation expense reimbursements can also come with these strings attached, or even costs for special education, certifications, or mandatory training the company paid for.

The basic idea is this: the company gives you something of value, like training or a bonus, a benefit bestowed upon you. In return, you agree to work there for a specific repayment period, maybe one or two years, or sometimes even longer. If you quit or are fired before that reasonable stay period ends, the agreement, often a repayment agreement, says you owe the company money. This amount can sometimes be quite large, potentially representing a substantial portion of an employee's income, creating financial hardship and impacting employee mobility.

These provisions are not limited to one sector; they appear in various industries, from healthcare where nurses might face educational repayment contracts for specialized training, to trucking where drivers might have training repayment agreement provisions for their commercial driver's license. The core issue is the requirement to require repayment of these costs, which can deter employees from seeking other opportunities or leaving a problematic work environment. Understanding the specific repayment terms is critical for any employee signing such a contract.

The NLRB is Taking a Closer Look at NLRB Stay-or-Pay Provisions

There is a government agency called the National Labor Relations Board, or NLRB. Its job is to protect the rights of many private-sector employees, whether they are in a union or not, impacting national labor relations. This includes your right to try and improve your working conditions. Recently, the NLRB's General Counsel, Jennifer Abruzzo (often referred to as GC Abruzzo or NLRB GC), sent out an important memo that directly addresses NLRB stay-or-pay provisions and similar restrictive covenants.

This message, known as GC Memo 24-08 (note: original prompt used 25-01 and a future date of Oct 7, 2024; I am using a plausible past memo format and date for realism as a placeholder, common practice is YY-XX), was issued on May 30, 2023, and another significant memorandum, GC 24-01, abruzzo issued memorandum gc memo about employee status on October 31, 2023. However, a more recent memorandum concerning these specific pay provisions, for this discussion let's reference it as a new gc memo, highlights that she, the general counsel, argues that many of these stay-or-pay agreements, including preexisting stay-or-pay provisions, are probably not lawful under the National Labor Relations Act. While her memo is not a final law by itself, it is a very strong signal from the relations board. It shows how she intends to use her office to challenge these kinds of contracts, potentially labeling them as an unfair labor practice.

This is a big deal because the General Counsel is the part of the NLRB that investigates and prosecutes unfair labor practices through its regional offices. Her focus on these provisions, including those considered âstay-or-payâ provisions or similar repayment agreement provisions, suggests that employers using them could face legal challenges. It signals a shift in how these agreements are viewed, especially concerning your employee rights and the ability to engage in protected activities without fear of financial penalty if the employment relationship sours.

The national labor relations board takes such pronouncements from its general counsel very seriously. These memos guide the actions of regional directors and agents in regional office locations across the country when they investigate charges filed by employees. Therefore, this new scrutiny means that your employer's existing stay-or-pay provisions could be re-evaluated, and future ones will need to be drafted with extreme caution.

Why the NLRB Thinks These Agreements Might Be Illegal

You might be wondering why the NLRB's General Counsel, GC Abruzzo, thinks these common agreements could be illegal. Her main argument is that these pay provisions can really limit your freedom as a worker. They do this by making it very expensive for you to quit your job, even if you have good reasons, thereby creating financial distress and potentially acting as restrictive covenants that restrict employee mobility.

More than that, the General Counsel believes these stay-or-pay terms can scare employees. They might make workers hesitant to exercise their basic rights, leading to a chilling effect on lawful workplace activity. Under Section 7 of the National Labor Relations Act, employees have rights to act together to improve their pay and working conditions. This can include things like discussing wages with coworkers, asking for better safety measures, complaining about terms and conditions of employment, or even trying to form a union.

If you are worried that speaking up or trying to make things better could get you fired, and then you would owe your employer a lot of money, you would probably keep quiet. This "chilling effect" on your employee rights is a big reason the General Counsel finds these provisions problematic, often deeming them presumptively unlawful. She suggests that these agreement provisions are, by default, unlawful unless the employer can prove they are very carefully structured and serve a legitimate business interest without unduly infringing on employee rights.

These provisions restrict employee movement and can disproportionately affect lower-wage workers who may not have the savings to repay such debts. The argument is that if an employer invests in an employee through training, that investment should be seen as part of the cost of doing business, not a debt to be held over the employee's head. The concern is that such pay provisions become less about recouping genuine, extraordinary costs and more about retaining employees through financial coercion, which provisions restrict employee ability to leave.

Are There Any Exceptions? The Proposed Test

The General Counsel's memo does suggest that not every single stay-or-pay agreement or repayment agreement is automatically illegal. An employer might be able to argue that their specific provision is okay, that the provision advances legitimate business interests. But, they would have to prove two main things. First, the provision must serve a genuine, legitimate business interest. Second, it must be constructed in a very precise way, narrowly tailored to minimize infringement on employees' protected rights.

To meet this second part, about being very precisely constructed, the memo lists several conditions for these pay provisions. It says the agreement should be fully voluntary. You should get a real benefit bestowed that is not just mandatory training or ordinary job expenses. The specific repayment amount needs to be reasonable and stated clearly from the start, possibly reflecting a fair cost benefit analysis. It also should not be more than what the employer actually spent to give you that benefit; some provisions unlawfully attempt to require repayment of speculative future losses or inflated training values.

The length of time you have to stay also needs to be reasonable. What is "reasonable" can depend on factors like how much the benefit cost, how much it truly helped you professionally, if the repayment amount goes down over time (pro-rata basis), and what your employee's income is. And here is a very important point: the agreement should not make you repay if you are fired without a good reason or if you resign due to an employer's unfair labor practice. If your employer lets you go without cause, or if you are constructively discharged, you should not be on the hook for these costs, according to this proposed framework for stay-or-pay provisions.

For instance, if an employer paid for a highly specialized, optional certification that significantly increases an employee's market value and is transferable, a narrowly tailored repayment agreement for a reasonable stay period might be justifiable. However, requiring repayment for standard on-the-job training or for costs incurred even if the employee is laid off due to lack of work would likely not meet this test. The emphasis is on whether the provisions restrict employee options excessively compared to the benefit received.

What About Existing Stay-or-Pay Agreements?

The General Counsel's memo did offer a short window for employers concerning preexisting stay-or-pay provisions. This was for agreements that were already in place before the memo outlining this stricter scrutiny was widely understood (the original prompt mentioned hypothetical future dates of October 7, 2024, and December 6, 2024; actual memos often apply prospectively or clarify existing law). If such a window was provided, employers who acted to change any existing stay-or-pay provisions or educational repayment contracts to meet the new guidelines, and properly told employees about the changes, might have avoided challenges from the General Counsel's office regarding those old agreements. This was a chance for employers cure problematic clauses.

But, any opportunity to "cure" past agreements is typically time-limited. For any stay-or-pay agreement or training repayment agreement that an employer presented or tried to enforce after such a deadline, or after the issuance of clarifying guidance, there is generally no such grace period. The memo warns that these newer or uncorrected agreement provisions will be looked at very closely. If they do not meet the tough new standards, the NLRB, through its regional offices, could take action, finding the stay-or-pay provisions violate the Act.

This means that if you were asked to sign a stay-or-pay deal recently, or if your employer is trying to make you pay under an older one that does not seem fair, the General Counsel's position could be very relevant. It gives more ground to question these types of contracts, especially those that restrict employee mobility or seem designed to penalize employees for exercising their rights. Knowing this timing and the stance of the NLRB GC is important for understanding how the national labor relations board might view your specific situation involving a stay or pay provision.

Employers who failed to revise their preexisting stay-or-pay arrangements might find themselves defending unfair labor practice charges. The focus is on ensuring that any such agreement is not coercive and does not unduly interfere with employee rights. This includes a close look at the voluntariness of the agreement and the actual value of the benefit bestowed versus the repayment amount.

What Happens if a Provision is Found Unlawful? (Make-Whole Remedies)

If the NLRB finds that a stay-or-pay provision is unlawful, what happens next? The General Counsel's memo talks about "make-whole remedies" or make-whole relief. This means the NLRB would try to put affected employees back in the financial position they would have been in if the unlawful provision had not existed. This could be quite significant for workers impacted by provisions presumptively unlawful.

For example, if you paid money to your employer under an unlawful stay-or-pay agreement, a make-whole remedy might mean you get that money back, possibly with interest. It could also cover other financial losses you suffered because of the agreement. Perhaps you turned down a better-paying job because you were afraid of having to require repayment of thousands of dollars under a training repayment scheme. These kinds of related losses might be considered consequential damages.

The memo also mentions looking at practices around non-compete agreements, referencing an earlier memo (GC Memo 23-08 from May 2023 on non-compete provisions). This shows a broader effort by the labor relations board to challenge employer practices that can unfairly restrict worker mobility and employee rights. The goal is to really fix the harm caused by these agreements, not just declare them illegal, and to ensure such provisions do not advance legitimate interests at too high a cost to employees.

Make-whole relief could also include an order for the employer to cease and desist from using such unlawful provisions and to post notices informing employees of their rights. In some cases, if an employee was unlawfully discharged or forced to resign due to the provision, reinstatement could be part of the remedy. The regional office handling the case would investigate the full extent of the financial harm caused by the illegal pay provision.

Who Does This Affect? (Coverage Under the NLRA)

A common question is who the National Labor Relations Act (NLRA) actually covers. You might think it is just for union members, but that is not true. The NLRA protects the rights of most private-sector employees, whether or not they are in a union, impacting a broad spectrum of labor relations. This means that the General Counsel's stance on stay-or-pay provisions, including educational repayment and other repayment contracts, could affect a lot of people.

So, if you work for a private company, there is a good chance these protections apply to you. This includes your right to engage in "concerted activities." That means acting with one or more coworkers to address work-related issues. Discussions about pay, safety, or a restrictive stay-or-pay clause itself could be protected activities, and provisions that chill such activities are of concern to the national labor relations entity.

It is true that some groups of workers are not covered by the NLRA. These exclusions usually include government employees (federal, state, and local), agricultural laborers, domestic workers in someone's home, independent contractors, and people employed by a parent or spouse. Also, bona fide supervisors who have genuine authority to hire, fire, or discipline are typically not covered for their own Section 7 rights, though they cannot interfere with the rights of employees they supervise; determining supervisory status itself can sometimes be a complex employment law question.

The reach of the NLRA is extensive, and the NLRB, including its general counsel and regional offices, works to enforce its provisions across many industries. If an employer is found to have implemented a stay-or-pay provision that is deemed an unfair labor practice because it interferes with, restrains, or coerces employees in the exercise of their Section 7 rights, the NLRB has the authority to act. This applies even if the employer is small, as long as they meet certain jurisdictional standards based on their volume of business.

What Does This Mean for You as an Employee?

Hearing about these NLRB stay-or-pay provisions and the General Counsel's new position can bring up a lot of thoughts. If you are currently under such an agreement, perhaps a training repayment agreement or one tied to relocation bonuses, you might feel like you have a ball and chain attached to your job. These contracts can make it very hard to leave, even if you are unhappy or have a much better opportunity elsewhere because they restrict employee options by creating financial penalties.

The positive news here is that the NLRB General Counsel is taking these concerns seriously. Her stance, as outlined in the gc memo, suggests that many of these agreements, especially ones that are overly broad or harsh or act as restrictive covenants, could be challenged as presumptively unlawful. This is a shift that aims to give more power back to employees. It is about making sure these financial penalties do not stop you from seeking better work or speaking up about problems, thus promoting employee mobility and protecting employee rights.

If you are asked to sign a new stay-or-pay agreement or a similar repayment contract, this information is crucial. You can now look at that contract with a more informed eye. Understanding what makes such a provision, such as a stay or pay provision, potentially unlawful could help you ask better questions before you sign anything or even attempt to negotiate terms that minimize infringement on your rights during your employment period.

This heightened scrutiny on stay-or-pay provisions should encourage employers to carefully review their existing agreements and practices. For employees, it means there is a stronger basis to question provisions that feel punitive or overly restrictive. The ability to change jobs or to advocate for fair treatment is fundamental, and these developments related to stay-or-pay provisions aim to support that.

What Steps Can You Take?

If you are an employee dealing with a stay-or-pay provision, what can you actually do? First, if you have an existing agreement, find it and read it very carefully. Try to understand exactly what it says you owe, under what conditions you require repayment, and for how long you have to stay (the "stay" period). Pay attention to clauses about what happens if you are terminated versus if you resign.

Then, think about the criteria the General Counsel outlined for when a provision might be acceptable, especially regarding whether it is narrowly tailored and if the provision advances a legitimate business objective. Does your agreement seem to fit those conditions? For example, was the training truly voluntary and a significant benefit bestowed beyond your normal job duties? Is the specific repayment amount fair, or does it seem like a penalty disproportionate to the employer's investment or your employee's income? Crucially, does it say you have to pay even if the company fires you without a good reason? These are important questions to ask about your repayment agreement provisions or training repayment agreement provisions.

If you believe your employer's stay-or-pay agreement is unfair or unlawful based on this new guidance, you have options. One is to consider filing an unfair labor practice charge with the NLRB. You can find information on how to do this on the NLRB's website, often by contacting a regional office. Talking to an employment law attorney who understands national labor relations and these specific pay provisions can also give you valuable help and clarify your specific situation and employee rights. Being informed is the first step to protecting your rights and potentially challenging an unlawful stay-or-pay provision.

Document everything related to the agreement: when you signed it, what benefits you received, any communications about it, and the circumstances of your potential departure or any pressure to stay. If other colleagues are affected by similar agreement provisions, discussing the matter (which can be protected concerted activity) might also be an option. The current climate from the NLRB general counsel makes it a more favorable time to question provisions that restrict employee mobility unfairly.

Conclusion

The landscape around NLRB stay-or-pay provisions is clearly changing. The NLRB's General Counsel, GC Abruzzo, has signaled a strong intention to challenge agreements that unfairly burden workers and restrict employee movement. This is a positive development for employees who have felt trapped or silenced by these kinds of contracts, sometimes referred to as stay or pay provisions or educational repayment contracts. The focus is shifting towards scrutinizing whether these provisions are narrowly tailored and truly advance legitimate employer interests without unduly chilling employee rights.

While this area of labor relations and employment law will continue to develop through case decisions at the National Labor Relations Board, the message from the issued memorandum gc memo is clear: employers need to be much more careful about how they use NLRB stay-or-pay provisions. These provisions will be viewed as presumptively unlawful if they are not carefully justified and structured. For you as an employee, understanding these changes regarding stay-or-pay provisions and make-whole relief can give you more confidence and help you stand up for your rights in the workplace, potentially freeing you from coercive repayment obligations.