NLRB General Counsel Jennifer Abruzzo has broadened her attack on employee retention strategies. As employers await the fate of the FTC’s non-compete ban in the courts, Ms. Abruzzo now seeks to outlaw agreements requiring employees to reimburse their employer for training and other benefits if they leave before an agreed date.
“Stay or Pay” Ban: In a memorandum issued this week, Ms. Abruzzo said most “stay or pay” agreements will be presumptively unlawful because they “both restrict employee mobility . . . and increase employee fear of termination for engaging in activity protected by the [NLRA].”
Agreements will only be permissible if they:
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Are entered into voluntarily in exchange for a benefit;
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Have a “reasonable and specific” repayment amount;
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Have a “reasonable stay” period; and
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Do not require repayment if the employee is terminated without cause.
Company’s exposure: Employers have 60 days from October 7th to modify pre-existing “stay or pay” provisions under requirements detailed in the memo. Only those provisions that have a legitimate purpose other than retention may be brought into compliance (e.g., obtaining new credentials required for a promotion).
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Remedies may include “making whole” employees who were deterred from leaving due to the agreement and, therefore, missed opportunities for a better job.
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Similar remedies would be available to employees subject to non-compete bans, including relocation costs, under the memo.
Reality check: The memo is only the position of the General Counsel and, if enforced by the Board, could then be challenged in federal court. In addition, the Board can only respond to a complaint from an employee or other party and, unlike other enforcement agencies, cannot initiate an investigation on its own.
The bottom line: The memo further illustrates the Biden administration’s focus on employment agreements that hinder employee mobility.
