Stay-or-pay contracts, often called Training Repayment Agreement Provisions (TRAPs), are agreements requiring employees to pay back training costs if they leave a job early. Employers may use these to recoup costs for employer-required training, educational programs, or other expenses if an employee leaves within a set period. These provisions are common in high-turnover industries like healthcare and trucking to recoup training costs, acting as a form of workplace debt.
Key Aspects of Stay-or-Pay in Alabama:
- Enforceability: As of early 2026, Alabama law does not explicitly prohibit these contracts. Because no state-specific law restricts them, these agreements are generally governed by common law principles of contract enforceability. They are often treated as enforceable training reimbursement agreements or promissory notes.
- Workers are typically forced to repay these costs or face legal action or debt collection. While Alabama is an at-will state, meaning employees can leave at any time, stay-or-pay contracts create financial barriers to mobility.
Legal Risks:
- Courts may scrutinize whether the amount to be paid back is reasonable, represents actual training costs rather than a penalty, and is not designed to prevent an employee from quitting.
- While generally allowed, such contracts cannot typically require repayment of legitimate wage payments. They are also not applicable to collective bargaining agreements.
Federal Action: These contracts are facing federal scrutiny as modern-day indentured servitude, and are becoming a significant topic of legal debate across the U.S. Federal regulators. The National Labor Relations Board (NLRB) and the Department of Labor (DOL) are targeting these agreements, particularly when they violate the Fair Labor Standards Act (FLSA) by reducing pay below minimum wage or inhibiting employee rights.
Emerging Restrictions: Other states (e.g., California, New York) have begun passing legislation that renders these agreements unenforceable or highly restricted.
While this hasn’t reached Alabama yet, Alabama employers are advised to review these trends to avoid costly litigation.
By Karen Burton, SHRM-SCP, SPHR
