Beware the Contract Clause Loading US Workers With Debt

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A TRAP bite can be especially painful when a worker has been led to believe that it will not be used. Scally couldn’t afford to pay off her debt to PetSmart, but claims her manager told her that as long as she worked at the company long enough for her to recoup the $5,500, she likely wouldn’t honor the deal. He stayed until September 2021, when he calculated that he had gotten his money back from PetSmart.

Four months later, Scally checked her credit report and saw that she owed $5,500 to “IC System.” He called to investigate and learned the company was a debt collector hired by PetSmart. Scally had been working to get her credit score high enough to get a loan to start her own animal rescue business; now it has collapsed. “It was like you took 10 steps forward, and now you’re pushed back eight,” he says.

Adrian Valdés, formerly a dog bather at PetSmart, describes a similar test. They enrolled in the Grooming Academy program in 2020 because it was their only way to receive health insurance and guaranteed hours. But three months after they finished training, they found a job as a dog bather at another company with better pay and health insurance.

Valdés preferred bathing the canines to preparing them, but he faced the dangers of the TRAMPA. Two former colleagues who had left before their contracts were up told Valdes that PetSmart had not enforced their repayment agreements. Valdés calculated that his own earnings for the company exceeded the $5,500 fee and decided to quit. About a month later, a bill arrived from a collection agency for $5,500. “I was the unlucky one,” says Valdés.

Chris Hicks, SBPC’s senior policy adviser and co-author of their report, says Scally and Valdés’ ordeal is not unusual: Most of the workers they spoke to did not know whether their TRAP should be enforced. “They were saying, ‘Some of my former co-workers left and weren’t sued. So I think I can leave. But then they would see it enforced.” Hicks says this pattern can leave workers with unexpected and unaffordable debt, or cause people to stay in bad jobs, fearing the consequences of leaving.

Luckily for Valdés, they had attended meetings organized by the labor advocacy organization United for Respect, which helped contest the position. It was eventually cancelled. If it hadn’t been, says Valdés, “I would have declared bankruptcy”.

Previous cases brought against employers have argued that TRAPs violated the Fair Labor Standards Act, but courts have often upheld the settlements. However, some states have recently begun to restrict the use of TRAP, and federal regulators have also shown interest.

In 2020, California lawmakers enacted legislation banning the use of TRAP for health care workers in the state, and in May of this year Colorado lawmakers passed a bill banning its use by to standard on-the-job training. In June, the US Consumer Financial Protection Bureau opened an investigation into employer-driven debt, including TRAPs.

After setting off her own TRAP, Scally found work as an animal care technician in South San Francisco. Debt and the PetSmart dispute have pushed back his timeline, but he still hopes to open his own animal sanctuary one day, where he can rescue dogs and groom them on his own terms.

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