AG testimony: Before the Senate Committee on Business, Labor and Technology regarding H.B. 24-1324 (April 23, 2024)

Chair Danielson and members of the Committee, thank you for the opportunity to testify today in favor of House Bill 24-1324 (“HB 24-1324”). This bill addresses an increasingly prevalent practice of misuse of training repayment agreement provisions (“TRAPs”) to restrict worker mobility and take advantage of lower wage workers.

TRAPs are contractual provisions that require workers to repay their employers for the cost of training or education if they leave their job within a certain period. When used legitimately, TRAPs can serve as a mechanism to provide valuable skills to employees while also benefitting employers. For example, an employer might elect to pay for a degree, such as an MBA, for an employee. In this situation, the degree is independently valuable to the employee and also provides them with useful skills that benefit the employer. Under Colorado law, employers are permitted to recover the cost of such significant investments proportionally over two years.

Increasingly, we are seeing a troubling trend of misusing TRAPs. Such misuses—and even abuses—of these agreements happen where the training provided to employees is neither valuable nor transferrable but, rather, is a ruse for keeping employees on the hook for the cost. In some cases, workers like dog groomers and aestheticians are saddled with thousands of dollars in training “repayment” costs that kick in if they try to leave their jobs, without any genuine and transferrable credentials in return. [1] Unfortunately, many of the employees subject to such agreements lack the time or resources to defend themselves in court. Moreover, they don’t have the financial ability to pay these debts when employers or debt collectors seek repayment.

TRAPs were originally used in just a few select roles. They are now used in thousands of mid- and low-wage roles and are estimated to impact industries employing roughly one-third of all American workers.[2]  This means such agreements are used by large companies and small alike—in addition to being a favored tool of private equity-owned businesses. [3]

In Colorado, we are committed to protecting workers and the ideal of fair treatment for all. This bill is an important advancement in furtherance of that commitment, providing critical worker protections and enforcement mechanisms to combat the predatory use of TRAPs. It will ensure that employers cannot require employees to pay for training unless it is valuable and transferrable. And to ensure that TRAPs are used appropriately, the bill provides the Attorney General’s Office with additional oversight mechanisms and enforcement authority over TRAPs to ensure that we can take action where there are systemic issues. The bill also clarifies that the traditional consumer protections apply to TRAPs.

In short, this is a critical bill to give my office the tools we need to stop workers from being taken advantage of through these TRAP agreements.

Thank you for the opportunity to testify today. I appreciate your consideration and am happy to answer any questions the Committee may have.

 

1 https://www.nytimes.com/2023/11/20/magazine/stay-pay-employer-contract.html
2 https://www.nytimes.com/2023/11/20/magazine/stay-pay-employer-contract.html; https://protectborrowers.org/wp-content/uploads/2022/07/Trapped-at-Work_Final.pdf
3 Id.