FTC issues final rule to limit ‘exploitative’ contracts

The Federal Trade Commission (FTC) on Tuesday issued a final rule that bans noncompete clauses and limits certain stay-or-pay contracts, a policy that greatly affects nurses.

The stay-or-pay contract practice requires nurses to put in a certain amount 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,” according to National Nurses United (NNU), a union that represents about a quarter of a million registered nurses (RNs).

“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,” NNU President Nancy Hagans said in a statement, adding that these contracts “exploit vulnerable new graduate nurses at the very start of their careers.”

Noncompliance can result in payments of $10,000–$30,000, according to NNU. The contracts, which can also include training repayment agreement provisions (TRAPs), aim to deter nurses from leaving—especially as hospitals face severe staffing shortages.

Younger and more educated workers are more likely to sign a contract with a TRAP, according to a letter sent to FTC officials on April 1 that urged them to pass the rule.

Citing research from the NNU, which was one of 20 cosigners, the letter added that “among registered nurses in hospitals who had been RNs for one to five years, nearly 45% reported having been in a TRAP. In contrast, for those who had been RNs for 11–20 years, only 24% had ever been in a TRAP.”

Chris Letts, an RN at Mission Hospital in Asheville, North Carolina, said they began their tenure at HCA Healthcare under a TRAP agreement.

“I understand well how these provisions keep nurses locked into environments that jeopardize both nurse and patient safety,” Letts said in a statement. “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.”

Harlow Sumerford, a spokesperson for HCA, which is one of the largest hospital operators in the country, said the system “does not require nurses to enter into repayment agreements related to training programs.”

The FTC added that the rule is expected to increase wages for workers by about $524 per year and lower healthcare costs by up to $194 billion over the next decade, per the announcement.

The final rule takes effect 120 days after it’s published in the Federal Register, per the FTC.