NNU applauds FTC’s new rule on stay-or-pay contracts

By Rachel Berger

National Nurse magazine - April | May | June 2024 Issue

National Nurses United applauded the FTC’s ruling, announced April 23, that limits the use of certain stay-or-pay contracts, including training repayment agreement provisions (TRAPs) that have burdened many nurses. Stay-or-pay contracts require nurses to work a set period of time or be required to pay money to their employer for an alleged debt, which could be tied to so-called training, a sign-on bonus, or other costs their employer claims are related to their employment. These payments are often in the range of $10,000 dollars but can reach up to $30,000 or more and bind nurses for two or more years.

NNU has long advocated against these exploitative and coercive provisions that amount to modern-day indentured servitude. In addition, NNU notes these stay-or-pay contracts place nurses in positions where they can face ruinous consequences for speaking out about working conditions, patient safety, and leave them open to serious financial consequences for leaving their employment.

“The new FTC rule is a step in the right direction for nurses and those aspiring to take on this critical role in our communities,” said Nancy Hagans, RN, president of National Nurses United. “We know that TRAPs and other stay-or-pay contracts exploit vulnerable new graduate nurses at the very start of their careers.”

Under the new rule, most employers regulated by the FTC will be categorically prohibited from binding workers with traditional non-compete provisions. A stay-or-pay provision is included in the ban when it is so broad or onerous that it “functions to prevent” a worker from seeking or accepting another job or starting their own business. This functional non-compete ban should include many of the stay-or-pay contracts imposed on nurses. NNU’s research shows that employers use stay-or-pay provisions to control nurses and set repayment amounts that are onerous enough to stop nurses from taking new jobs. The use of stay-or-pay contracts has grown rapidly and serves as a substitute for traditional non-compete agreements, which are already unenforceable under some state laws.

Today’s rule comes after years of advocacy by NNU and other union and consumer protection groups who have urged federal agencies and state legislatures to prohibit stay-or-pay contracts. In response to the FTC’s request for public comments on the draft non-compete ban rule, NNU urged the Commission to categorically ban stay-or-pay contracts and submitted data from a 2022 NNU survey of nearly 1,700 nurses and a comprehensive description of the use of TRAPs and their effects on nurses, working conditions, and nurse union and advocacy work.

NNU found that nurses commonly reported that the financial contracts binding them to their employers contributed to poor working conditions. Of the more than 325 nurses surveyed who said they are or were in TRAPs, 34 percent said they felt restrained from complaining about unsafe staffing or other unsafe or unfair working conditions. In addition, nearly 40 percent of those same nurses reported they had to accept low wages during the term of the contract.  Many nurses reported being required to work in units that had dangerously low nurse-to-patient staffing ratios. They also reported being assigned the least desirable shifts and otherwise being mistreated but feeling locked into their jobs by the repayment provisions. In comments and interviews, nurses recognized danger to themselves and their patients but reported feeling constrained in their ability to complain or leave because of a TRAP.

“As a nurse who began my tenure at an HCA hospital with the burden of a TRAP agreement, I understand well how these provisions keep nurses locked into environments that jeopardize both nurse and patient safety,” said Chris Letts, a registered nurse at HCA’s Mission Hospital in Asheville, N.C. “HCA uses these kinds of contracts to coerce nurses to stay in unsafe working conditions, while attempting to silence us from our advocacy and threatening us with massive penalties. To now see limits in place on the use of these types of provisions is a victory for nurses and our patients.”

Rachel Berger is a communications specialist at National Nurses United.