California has enacted a new law prohibiting “stay or pay” contracts that force employees to repay employers for training costs if they leave early. The law, effective January 1, 2026, bans penalties like exit fees and training debt repayment designed to keep workers trapped, according to The Washington Post.
What Are TRAPs and Why Are They Problematic?
Training repayment agreements (TRAPs) have been used in many industries—including healthcare, retail, and transportation—to bind employees to their jobs by imposing steep financial penalties for early departure. These contracts often saddle workers with thousands of dollars in debt, limiting their freedom to seek better opportunities.
Federal Efforts Stall, States Take Action
While federal agencies have rolled back rules aimed at limiting such contracts, several states are stepping up with their own legislation. New York is close to passing similar protections, and Minnesota, Ohio, and Vermont are considering anti-TRAP bills.
Meanwhile, state attorneys general have won settlements forcing employers to repay workers for unjust training debts.
The growing movement against TRAPs is supported by labor advocates, consumer protection groups, and antitrust activists. They argue that these contracts stifle competition in the labor market and limit economic mobility.
Concerns also extend to immigrant workers, with some companies threatening legal and immigration consequences for unpaid training debts.
Bipartisan Support and Economic Impact
Anti-TRAP laws have gained traction across the political spectrum. Republican-led states like Wyoming and Indiana have enacted restrictions on such contracts, recognizing their negative impact on free markets and labor shortages.
This bipartisan momentum highlights the issue as central to economic fairness and worker rights.
With limited federal oversight, states are becoming the primary battleground for protecting workers from exploitative employment contracts. These laws aim to promote fair labor practices, increase worker mobility, and support a more competitive job market.
