Washington, D.C. — Following California Attorney General Rob Bonta’s announcement that employer-driven debt “TRAPs” may violate multiple California laws, the American Economic Liberties Project released the following statement.

“More than one-in-ten workers are bound by restrictive employment agreements that require them to incur thousands of dollars of debt for routine on-the-job training” said Lee Hepner, Counsel at the American Economic Liberties Project. “Employer-driven debt ‘TRAPs’ disproportionately harm low-wage workers, women, and communities of color, and are pervasive in industries ranging from trucking to dog grooming to healthcare.

“In the context of this summer’s broadening labor strikes, we’re witnessing a powerful backlash to a half century of wage stagnation and resulting inequality,” continued Hepner. ”TRAPs also stifle innovation and new business formation by workers seeking to chart out on their own. There is no justification for preventing workers from seeking better pay and working conditions, or from starting a business of their own, and we are thrilled to see AG Bonta make clear this practice is illegal.”

Employer-driven debt agreements, otherwise known as Training Repayment Agreement Provisions (“TRAPs”), have become the subject of greater scrutiny in the wake of multiple studies and lawsuits regarding their increased use by employers and harm to workers. In the wake of federal and state efforts to regulate non-compete agreements, trade groups have begun advising employers that TRAPs offer a means to circumvent regulatory scrutiny.

In California, Assembly Bill 747 (McCarty) would expressly prohibit TRAPs and other contracts that restrict worker mobility, including agreements that require workers to incur debt for VISA-related work costs.

California AG Bonta’s announcement comes in the wake of a report released last week by the Consumer Financial Protection Bureau, which found a striking increase in the use of TRAPs, posing significant risks to consumers, particularly when employers use unequal bargaining power to require workers to become indebted to the employer or an affiliate as a condition of employment.

In January 2023, the Federal Trade Commission issued a Notice of Proposed Rulemaking to ban non-compete agreements and other de facto non-compete agreements, including Training Repayment Agreements.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.