Unconscionability in Contracting for Worker Training
67 Pages Posted: 27 Aug 2020 Last revised: 30 Dec 2020
Date Written: August 12, 2020
Despite urgent calls for retraining and upskilling workers amidst the threat automation poses to many existing jobs, a forty-year-long reduction in public and private worker training programs means that some firms offer training only with contractual strings attached. This Article exposes the dangers of these conditional training contracts and proposes the law of unconscionability as a more effective framework for legal challenges than the statutory-based claims more commonly advanced by plaintiffs.
One type of conditional training contract, the training repayment agreement (TRA), requires an employee to pay the employer a fixed or pro rata sum if the employee received on-the-job training and quits work or is fired within a set period of time. TRAs often constrain employee mobility without providing employees the portable skills needed for quality jobs. Many courts and scholars have treated TRAs favorably, however, especially as compared to noncompete covenants which can harm workers in ways similar to TRAs. This Article offers a set of factors to determine unconscionability in TRAs as an analogue to the group of “reasonableness” factors under the law of noncompetes. These proposed factors focus on the TRA repayment amount, the length of time required to work to avoid repayment, and the nexus between the repayment amount and the training’s cost to the employer and benefit to the employee. The Article also compares TRAs with another type of emerging conditional training contract: the income share agreement (ISA). Under an ISA, a lender advances a certain amount of training in exchange for a set percentage of the trainee’s future income.
Ultimately, worker training should be reenvisioned as a collective investment. In the meantime, an unconscionability framework for assessing conditional training contracts would be a practical step in the right direction.
Keywords: contract law, employment law, employee benefits, labor law, personnel economics, economic perspectives, legal theory
JEL Classification: J00, J2, J3, J4,J5, J6, M5
Suggested Citation: Suggested Citation