Vermont hearing spotlights push to ban noncompetes and curb "stay-or-pay" training debts

MONTPELIER, Vt. — The Vermont House General & Housing Committee heard testimony April 9 on H.334, a bill that would prohibit most noncompete agreements and restrict so-called “stay-or-pay” or training-repayment contracts that require departing employees to repay employers for training or other costs.

The measure drew unified support from four policy witnesses, who told the committee that noncompete and stay-or-pay clauses are widespread, depress wages, limit job mobility and can leave workers with large unexpected debts. The committee did not vote; members said the hearing will continue at a later date and asked witnesses and staff to supply follow-up materials.

Why it matters: Witnesses said the clauses affect a broad swath of workers — including low-wage employees and health-care staff — and that state-level action is important because a Federal Trade Commission rule limiting noncompetes is facing legal challenges. Supporters argued banning the clauses would increase worker mobility, encourage small-business formation and raise wages.

Pat Garofalo, director of state and local policy at the American Economic Liberties Project, told the committee noncompetes have expanded beyond executives into industries such as fast food and health care. “I urge the Vermont legislature to pass H.334 and ensure Vermont workers are able to determine their own economic futures for themselves,” Garofalo said. He cited a Federal Trade Commission estimate he summarized as projecting wage gains nationally that translate, he said, into more than $127,000,000 annually for Vermont workers overall — about $528 per worker, by his calculation.

Brian Colacci, chief economist at the Open Markets Institute, described the academic literature on noncompetes and said their enforcement reduces worker mobility and lowers wages. “These contracts are imposed on workers; they’re not negotiated,” Colacci said, adding that nationwide surveys and studies suggest tens of millions of private-sector workers are affected. He said the FTC’s rule banning most noncompetes remains under litigation and that a state law would provide a parallel enforcement path and could close gaps in the federal rule.

Sebastian Martinez Hickey, economic analyst at the Economic Policy Institute, provided national estimates of prevalence and wage impacts and translated those figures into a Vermont-scale estimate. “If we bring national prevalence to Vermont, it’d be around 87,000 workers in the state that were subject to noncompetes,” Martinez Hickey said, while acknowledging that state-specific data are limited.

Winston Berkman Breen, legal director at the Student Borrower Protection Center, focused on stay-or-pay and training-repayment agreements. He described cases his organization is litigating and gave examples of workers charged thousands of dollars after leaving employers: a student trainee facing a $9,000 bill after reporting an assault, a new nurse threatened with $7,500 in repayment, and a groomer receiving a $5,000 debt posting from an employer. “Stay-or-pay terms are employment contract terms that force workers to pay their employer if they leave their jobs. Full stop,” Breen said.

Committee members questioned witnesses about data gaps and legal mechanics. Several witnesses acknowledged that precise Vermont counts are not available because prevalence estimates rely on surveys and private contracts are not centrally reported; they offered to follow up with more state-specific data. Witnesses and members also discussed carve-outs in other states, the use of nondisclosure and non-solicitation agreements as narrower alternatives, and how stay-or-pay clauses can persist even where noncompetes are unenforceable because workers may not know their rights.

Discussion vs. action: The session was a hearing (no vote). Committee members and witnesses agreed the bill merits further consideration and follow-up. Witnesses offered to provide additional data and draft statutory language; a committee member asked a witness to send suggested language to the committee assistant.

Next steps: Committee Chair Mark Mahale and members indicated they expect to continue the hearing in the near term and requested follow-up materials from witnesses and staff before further action.

Sources: Testimony and exchanges at the Vermont House General & Housing Committee hearing on H.334, April 9, 2025.