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'Free' job training can cost a fortune for employees who quit

Devin Leonard, Bloomberg News on

Published in Business News

BreAnn Scally is a pet lover, the kind who wishes she could take home every stray she passes on the street. So she was intrigued last year when she discovered that PetSmart, the pet-supply chain, offered what it advertises on its website as “FREE paid” grooming training. She hopes to open her own cage-free animal shelter one day, and she figured she should get comfortable with a pair of clippers. That way, she wouldn’t have to pay someone when she brought home an errant pooch in need of styling. “I could just do it myself,” she says.

Scally, who was then 23, soon discovered PetSmart’s training wasn’t exactly free. Not long after she was hired in February 2021, she started in what PetSmart refers to as its grooming academy, at a store in Salinas, Calif. But first she had to sign a contract. It said that if she left less than a year after she started the program, she’d have to reimburse the company $5,000 for training costs and $500 for grooming tools. The penalty was reduced by half if she didn’t complete the second year. It seemed like a lot to someone making $15 an hour.

If only she hadn’t been disappointed by what followed. PetSmart, which declined to discuss Scally’s experience as an employee, says the academy includes three weeks of hands-on training from an instructor; workers must then trim 200 canines and spend six months as “stylists in training” before they can become full-fledged groomers. Scally, however, says she was rushed through, getting only two weeks of one-on-one training from her salon manager, who was often busy barbering pets for customers. By her account, she mostly learned to coif dogs on the job. She says that the store was understaffed and that she and her fellow groomers were often overwhelmed as they tried to assuage difficult customers, to say nothing of their sometimes ornery pets. “To be 100% honest, I hated it there,” Scally says. “It made me very depressed.”

So did the thought of having to pay $5,500 if she departed too soon. Regardless of the language of her contract, Scally says her managers told her that if she brought in enough money trimming dogs and persuading customers to buy more expensive shampoo and nail treatments for their pets, PetSmart wouldn’t pursue her for the training costs. She thought she was in the clear when she resigned last September after seven months at the company. But when she checked her credit report in January, she found that a collection agency in St. Paul, Minn., had come after her for the full $5,500 on PetSmart’s behalf. She was already dealing with student loans and credit card debt. And now this?

Such agreements were once unheard of, because companies believed it was their responsibility to pay for training. Jonathan Harris, an associate law professor at Loyola Marymount University in Los Angeles, has studied these clawback deals and says they emerged in the 1990s in high-paying fields like finance, where employees could be saddled with as much as $75,000 for a premature departure. They’ve since spread to more modest professions such as nursing and trucking. “In the last 5 to 10 years, they’ve really taken off,” Harris says. In 2020 the Cornell National Social Survey found that almost 1 in 10 American workers had signed one.

Attorneys who advise companies on how to use them say they’ve become almost indispensable in the Great Resignation. “I’m seeing employers enter into these agreements, saying, ‘I’m not about to put out of pocket the amount of money that it takes to get this person sufficiently trained in order for them to just go take that over to a competitor,’” says Angie Davis, chair of the labor and employment group at the law firm Baker Donelson in Memphis. “This is just a way for companies to protect themselves.”

 

PetSmart LLC, owned by BC Partners LLP, a British private equity firm, offers much the same defense of its clawback arrangements. The company, which is based in Phoenix and has about 1,660 stores in the U.S. and Canada, says that grooming training can cost as much as $10,000 elsewhere, and this is the only way it can offer its academy “free of charge.” (According to Pet Groomer.com Magazine, instruction can range from several thousand dollars to $13,000.) PetSmart says less than 2.1% of the more than 11,000 employees who’ve completed the program have departed before the end of their two-year contract. “We hope to keep them beyond their two years, but they’re learning a trade they could take with them potentially anywhere,” says Jenna Wait, quality and education leader for PetSmart in California.

But consumer advocacy groups say the contracts are often used to shackle workers to their job. Connecticut has banned what it refers to as “employment promissory notes” since the 1980s, unless they’re part of a collective bargaining agreement. In 2020, California forbade hospitals from making nurses sign them.

These deals have also been the subject of dozens of lawsuits alleging the costs involved don’t begin to approach the mandatory payback amounts—and, in one prominent case, a federal judge sympathized, even as courts have generally upheld the contracts.

In July, Scally became the latest worker to mount a legal challenge, filing suit against PetSmart in a San Mateo, Calif., superior court. In the complaint, her lawyers argue that, under California law, PetSmart can’t charge workers for training that’s primarily job-related. If the skills are easily transferable, Scally’s suit also claims, PetSmart is operating an unlicensed school and shouldn’t be pursuing former students for their debts. PetSmart declined to comment on the suit.

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