Noncompete clauses were the focus when federal regulators moved to outlaw most of them earlier this year.
But there are other employment provisions that can have the same “functional effect” as noncompetes, according to the Federal Trade Commission.
And one subtype of those provisions is coming under scrutiny in Pennsylvania. They are provisions that require employees to repay training costs if they leave a job within a certain period of time.
Where’s the scrutiny: Last year, Democratic state lawmakers in Harrisburg introduced a bill to ban the provisions. But more recent attention is coming from Pennsylvania Attorney General Michelle Henry.
Henry announced a settlement yesterday with PetSmart over repayment provisions in its contracts with pet groomers and stylists.
The pet products retailer advertised free training for groomers and stylists but required them to repay up to $5,500 if they quit within two years of starting their training, according to the AG’s office.
PetSmart had already agreed to end the practice and has taken steps to reverse any negative impact on employees, according to Henry, who described the practice in a statement as unfair.
“Employees taking advantage of seemingly free training are seeking to better their skills and knowledge for their jobs,” Henry said. “PetSmart took advantage of those aspirations and set Pennsylvania employees up to pay thousands of dollars while misrepresenting the terms.”
The settlement also requires PetSmart to pay $20,000 to the AG’s office.
Efforts to reach the company were not successful.
It is not the first time PetSmart has been in the crosshairs over repayment agreements. Former PetSmart groomers in California sued the company in 2022 over the agreements, which critics deride as TRAPs, an acronym for training repayment agreement provisions.
What’s the function: The FTC’s noncompete ban covers what the agency describes as “functional noncompetes,” that is, employment provisions that effectively prevent people from seeking new jobs.
They include nondisclosure agreements that are overly broad and training-repayment agreements where the required repayment is not “reasonably related” to the employer’s training costs.
The noncompete ban is slated to take effect Sept. 4, but legal challenges might push that back.
The background: Based in Phoenix and Toronto, PetSmart has more than 1,660 stores.
Local outlets can be found in Cumberland, Dauphin, Franklin, Lancaster and Lebanon counties.
