Employers used to routinely provide new hires with on-the-job training.
Many still do, but some now make them pay big bucks if they quit or are fired within a specified period; at PetSmart, that’s two years.
Let’s be more specific: If they quit to take a better-paying job or are fired for complaining about working conditions or helping to organize a union, because that’s how these employment agreements can be, and are, misused.
You can see where this is going: To court. A California woman who quit a minimum-wage pet grooming job at PetSmart after 7 months because she couldn’t live on $15 an hour was hit with a $5,500 collection agency debt that PetSmart asserted under the employment agreement she signed. Assisted by a public-interest law firm, she contends that contract provision is illegal.
As Huffington Post points out (here), such employment contracts “function a lot like noncompete clauses,” which prevent workers from going to rivals, and employers are turning to them as an alternative to noncompete agreements, which have come under sharp scrutiny by courts and legislatures.
It doesn’t take fancy math to see that if she was earning minimum wage, requiring her to repay the employer for her training reduces her pay below minimum wage. That’s one of her legal arguments. Her lawsuit also alleges violations of California employment laws, and accuses PetSmart of running an unlicensed “educational institution” (see details of lawsuit here).
Noncompete agreements as a condition of employment may be appropriate in limited circumstances; for example, to keep a competitor from luring away key employees, protecting proprietary trade secrets, or preventing a salesman from taking the employer’s customer list to a rival. Proper use of noncompete clauses generally relates to preventing unfair competition.
Back when most people only graduated from high school, and companies provided lifetime employment, employers often hired people entry-level applicants and trained them for jobs in factories and offices. It was a cost of doing business, and an efficient way to get workers with the specific skills they needed. Then long-term employment and employer-provided training faded away, and the burden of acquiring marketable skills was thrown on workers.
Employers incur costs to train new employees, and laws don’t require them to provide training; so on the surface, charging employees for training may look reasonable, especially if the employees normally would pay to get that training elsewhere, or above-average wages justified it. But it becomes less reasonable if the training isn’t useful outside that company, or is used as leverage to force people to work for low wages or in bad working conditions.
That’s the heart of the California woman’s lawsuit. She contends PetSmart’s practices amount to indentured servitude. PetSmart’s profitable dog-grooming business requires groomers, who need some training, and to fill those jobs in a tight labor market PetSmart should expect to pay competitive wages and provide the training as part of its cost of recruiting and retaining a workforce. Like other businesses expenses, it can be passed on to customers in the prices of services.
What’s especially disturbing about PetSmart’s practice of threatening employees with a huge debt sent to collection agencies if they quit is it forces them to either put up with horrible working conditions or face a heavy financial penalty if they walk away. Being able to impose that debt even if they’re fired should be a monster red flag to any state regulator or judge who looks at this, because it puts employees at risk of a financial penalty if they dare to complain about working conditions. And it doesn’t take a genius to see how the threat of this debt is a powerful tool to discourage union organizing efforts. There’s probably a lot here that violates various laws.
My advice to jobseekers is walk away from any job offer that involves signing such an agreement. Accepting a job should never expose you to debt. In an economy with two job vacancies for every unemployed worker, no one has to accept such terms to get a job, and it’s unwise to risk being stuck with debt if the job proves untenable.
Most older workers know to avoid such exploitation. It’s usually young people who get ensnared, and the law should protect them. A basic rule of our society should be that anyone can walk away from any job without penalty, and any employer rule or practice that violates that principle should be illegal.