Training Repayment Agreements for NEMT Drivers in 2027: What You Can Recover and What States Ban

You pay for a new driver’s PASS course, CPR card, defensive driving class, and your broker’s onboarding. Three months later the driver leaves for another company, and the next hire needs the same courses. A training repayment agreement, often called a stay-or-pay contract, makes the driver owe back part of that cost if they leave early. Federal wage law and a fast-growing list of state laws now decide whether you can use one, what it can cover, and how you collect.

What a training repayment agreement is

The agreement names a training cost and a stay period. If the driver leaves before the period ends, they owe part or all of the cost. Some versions add a quit fee or a fee for training the replacement, or ask for the wages paid during training.

The Consumer Financial Protection Bureau studied these terms in a report dated July 20, 2023. It found them spreading from high-wage jobs into lower-wage work in healthcare, transportation, and retail. Workers described terms rushed through at hiring, training valued far above its real cost, deductions from paychecks, and unpaid balances sent to debt collectors and credit reporting agencies. In one example, a trucking company charged drivers who left more than $6,000 for its commercial license school while paying the schools $1,400 to $2,500 per driver.

Most of what a NEMT driver learns in the first weeks is required for every driver on the road. Brokers and states set that list, as NEMT driver training shows, and courses like PASS are a condition of the job, not a perk. That distinction runs through every new state law below.

The federal limit: no repayment below minimum wage

Under the Fair Labor Standards Act, wages count as paid only when they are paid “free and clear” (29 CFR 531.35). If a cost mainly benefits your business, the driver’s payment back to you cannot cut into the minimum wage or overtime due that week. The Labor Department’s Fact Sheet 16 (revised July 2009) gives examples close to NEMT: tools, repairs after a driver wrecks the employer’s vehicle, and an employer-required physical exam. It adds that you cannot avoid the limit by having the worker repay you in cash.

The leading case is about paramedic training. In Heder v. City of Two Rivers, decided July 10, 2002, a city’s deal with its firefighters’ union required anyone who left within three years of training to repay its cost. One firefighter quit two and a half years after his training began, and the city withheld all of his pay for his last two pay periods. The federal appeals court upheld the repayment term under Wisconsin law, so he still owed about $1,400 for books and tuition. But it held he was owed at least the minimum wage for those pay periods, plus any overtime due, and the city had to collect the rest like any other creditor.

Here is how the floor works on a final paycheck. A driver earns $16 an hour and works 35 hours in the last week, for $560. The federal minimum wage of $7.25 protects $253.75 of it. Under federal law alone, no more than $306.25 could come out that week, and only where your state allows the deduction at all. A state with a higher minimum wage protects more.

State deduction laws are often stricter than the federal floor:

• California. The Labor Commissioner says only one loan installment may come out of a final paycheck, even with the worker’s written consent.
• Illinois. A deduction needs the worker’s express written consent, given freely at the time the deduction is made (820 ILCS 115/9).
• Minnesota. A deduction for a claimed debt needs the worker’s voluntary written authorization after the debt arises, stating the amount per pay period, and it is capped at the amount subject to garnishment (Minnesota Statutes 181.79).

Training time matters too. Required training counts as paid work time unless it is outside regular hours, truly voluntary, not directly related to the job, and involves no productive work (29 CFR 785.27). A course your broker requires is directly related to the job, so you pay for those hours. Asking a driver to hand those wages back runs into the same floor that decided Heder.

States that ban or limit training repayment

As of October 3, 2026, at least six states have laws that speak directly to these agreements. Connecticut already voids them as a job condition, New York and California ban them within the next three months, Washington limits them from mid-2027, and Colorado and Wyoming allow them within set limits.

State	What the law says	Applies to
Connecticut	Void when required as a condition of the job, at any size employer	Notes signed on or after October 1, 2026
New York	Void when required as a condition of the job, with a narrow credential exception	December 19, 2026
California	Unlawful to make a worker repay a debt or pay a quit or retraining fee when the job ends	Contracts signed on or after January 1, 2027
Washington	Education repayment only within 18 months of hire, prorated	June 30, 2027
Colorado	Reasonable cost of training beyond normal on-the-job training, shrinking over two years	Agreements since August 10, 2022
Wyoming	Up to 100 percent of costs under 2 years of service, 66 percent from 2 to 3, 33 percent from 3 to 4	Contracts since July 1, 2025

Connecticut. Public Act 26-12, approved May 11, 2026, rewrote section 31-51r of the state’s general statutes. Since October 1, 2026, no employer of any size may require an employee or job applicant to sign an employment promissory note as a condition of the job. Before, the rule covered only employers with 26 or more employees. The note is any agreement to pay the employer if the employee leaves before a stated time, and the law names repayment for training as one. A note signed that way is void. Agreements to repay money you advanced, to pay for property you sold or leased to the employee, and programs agreed with a union are still allowed.

New York. The Trapped at Work Act, Labor Law sections 1050 to 1055 as amended in February 2026, voids any employment promissory note you require as a condition of the job: any agreement making an employee pay you if the job ends before a stated time. It takes effect December 19, 2026. You may still ask an employee to repay tuition for a transferable credential, such as a license or certificate recognized across the industry. That takes a separate written contract that does not make the credential a condition of the job, states the amount in advance, prorates it, and requires nothing if you let the employee go except for misconduct. Training the law requires for workplace safety and compliance, and training in your own procedures, never counts. A PASS card your broker requires for the job fails the condition test. The labor commissioner can fine you $1,000 to $5,000 for each employee affected.

California. Business and Professions Code 16608 bars contract terms that make a worker pay you, a training provider, or a debt collector when the job ends, along with quit fees, replacement hire fees, retraining fees, and liquidated damages. It covers employees, job applicants, and others in a work relationship. AB 692 set the start for January 1, 2026, but AB 1697, effective September 30, 2026, made that version inoperative for all of 2026. The ban now covers contracts signed on or after January 1, 2027. The tuition exception is narrow: a separate contract for a degree from an accredited school that the job does not require, priced in advance, prorated, and owed only if the worker quits or is fired for misconduct. A PASS certificate or CPR card is not a degree. Under Labor Code 926, a worker can sue for actual damages or $5,000 per worker, whichever is greater, plus attorney’s fees.

The California law also says it does not limit your duty under Labor Code 2802 to repay employees for necessary expenses of doing the job. Use the rest of 2026 to rewrite your forms, and ask a California employment lawyer before you charge any driver for training.

Washington. Engrossed Substitute House Bill 1155, Chapter 149, Laws of 2026, takes effect June 30, 2027. It voids every noncompete in the state, whenever it was signed, and its definition reaches any term that makes a worker repay or forfeit money as a consequence of working in a lawful trade. A written agreement to repay out-of-pocket education costs survives only if it expires within 18 months of the start date, limits repayment to the share of those 18 months not yet worked, and releases the employee who leaves for good cause under the state’s unemployment law. A violation costs the greater of actual damages or $5,000, plus fees. By October 1, 2027, you must make reasonable efforts to tell current and former workers in writing that any noncompete still running is void.

Colorado. The 2022 law (HB22-1317, effective August 10, 2022) treats a training repayment term as a covenant that is void unless it fits an exception. It fits only if the training is distinct from normal on-the-job training, you recover no more than its reasonable cost, the amount drops in proportion to the months since training ended over two years, and collecting would not break federal or state wage law. You must also give notice: to a new hire before they accept the offer, or to a current worker at least 14 days ahead, in a separate document in the language you use about job performance, signed by the worker. On $600 of training, a driver who leaves 8 months after finishing owes at most $400. Presenting a void covenant can cost actual damages plus $5,000 per worker.

Wyoming. W.S. 1-23-108 voids most noncompetes in contracts signed on or after July 1, 2025, but keeps a contract term recovering relocation, education, and training costs on the sliding scale in the table.

If your state is not listed, the federal floor and your state’s wage deduction law still apply. Ask your state labor department or an employment lawyer before you use an agreement.

Noncompetes for NEMT drivers

Some owners reach for a noncompete instead: a promise not to drive for another NEMT company nearby. For hourly drivers, that tool is weak or illegal in much of the country.

The Federal Trade Commission’s rule banning most noncompetes never took effect. A federal court stopped it on August 20, 2024. On September 5, 2025, the FTC voted 3 to 1 to drop its appeals, and on February 12, 2026 it removed the rule from federal regulations. The FTC still brings cases one at a time. On September 10, 2025, its chairman sent warning letters to large healthcare employers and staffing firms urging them to review their noncompetes. On June 22, 2026, the FTC finalized an order requiring the pest-control company Rollins to stop enforcing noncompetes against more than 18,000 employees, including technicians and customer service representatives. The FTC said those agreements typically barred work in pest control for two years within 75 miles of a company location.

State law decides most cases. California voids every employee noncompete that fits no statutory exception and makes entering into or enforcing one a civil violation, wherever the contract was signed (Business and Professions Code 16600 and 16600.5). North Dakota voids contracts that restrain anyone from a lawful trade, except between owners when a business or an owner’s share is sold or the company splits up (Century Code 9-08-06). Wyoming voids them in contracts signed since July 1, 2025, with exceptions for trade secrets, the sale of a business, and executive and management staff.

Where driver noncompetes are void

As of October 2026, California, Minnesota, North Dakota, and Oklahoma void nearly every employee noncompete, Massachusetts and Virginia bar them for employees who earn overtime, and Colorado, Illinois, and Washington set the line by pay. Washington voids them all on June 30, 2027. The table shows each statute’s rule for noncompetes and for clauses that bar soliciting your customers.

State	Noncompetes	Customer non-solicitation
California	Void for employees unless an exception applies	Also void, under Edwards v. Arthur Andersen (2008)
Colorado	Void unless the worker earns at least the state’s highly compensated level and it protects trade secrets	Void below 60 percent of that level
Illinois	Void at $75,000 a year or less, rising to $80,000 on January 1, 2027	Void at $45,000 or less, rising to $47,500 in 2027
Massachusetts	Not enforceable against employees eligible for overtime	Not limited by the noncompete law
Minnesota	Void in agreements since July 1, 2023, including with contractors	Outside the ban
Oklahoma	A former employee may work for a competitor	Allowed for your established customers
Virginia	Banned for overtime-eligible and lower-paid employees, $10,000 penalty per violation	A noncompete cannot bar serving customers the employee did not solicit
Washington	Void at $126,858.83 a year or less in 2026, and void for everyone from June 30, 2027	From June 30, 2027, up to 18 months, only for customers the worker dealt with directly

Virginia also requires every employer to post a copy or approved summary of its noncompete law where other required notices hang.

Narrower tools that protect your business

Most owners are not worried about a driver working somewhere else. They worry about a driver taking a dialysis center’s standing orders or a facility’s discharge calls along. A few tools target that risk directly.

• Customer non-solicitation clauses. These bar a former employee from soliciting your clients without stopping them from working. Minnesota leaves them outside its ban, Oklahoma’s statute lets you bar a former employee from directly soliciting your established customers, and Washington allows them for up to 18 months from June 30, 2027. California voids them, and so does Illinois for workers earning $45,000 or less.
• Employee non-solicitation clauses. Oklahoma’s statute says a promise not to recruit your other employees or contractors is not a restraint of trade (15 O.S. 219B). Massachusetts keeps these outside its noncompete limits, and Washington’s new law allows them.
• Confidentiality clauses. Colorado allows a reasonable confidentiality term, such as one covering rider lists and rates, as long as it does not reach a worker’s general skills or information the public can find. Virginia’s noncompete law leaves nondisclosure agreements that protect trade secrets in place, and Washington’s excludes confidentiality agreements.
• Contracts with the facility itself. A signed transportation agreement with a dialysis center or nursing home ties the work to your company, not to the driver who knows the staff. See how to get NEMT facility contracts.

If you have a business partner, a noncompete between co-owners follows different rules. California, Minnesota, and North Dakota allow one between owners when the company dissolves, Oklahoma allows one between partners when a partnership dissolves, and California and North Dakota also allow one when a partner leaves. See starting a NEMT business with a partner.

Better ways to keep the drivers you train

A bonus for staying is simpler than a debt for leaving. Pay it after six or twelve months of service, with nothing to repay. It rewards the drivers who stay and leaves nothing to collect. A bonus you promise in advance counts toward the overtime rate, as NEMT driver retention explains.

Some states allow a sign-on bonus that must be paid back if the driver leaves early, under conditions. California, for contracts from January 1, 2027, requires a separate agreement, notice of the right to a lawyer with at least five business days to decide, no interest, repayment prorated over a retention period of no more than two years, and an option to take the bonus at the end of the period instead. Repayment can be owed only if the driver quits or is fired for misconduct. New York, from December 19, 2026, allows bonus repayment except when you let the driver go for a reason other than misconduct or misrepresented the job.

The bigger levers are schedules, pay, and vans. The retention guide covers what to fix first and what replacing one driver costs. NEMT driver pay shows pay plans that stay inside the wage laws.

How to write a training repayment agreement that holds up

If your state allows one and you still want it, build it to survive a challenge:

1. Check your state first. In Connecticut, do not require one as a condition of the job since October 1, 2026. In New York, stop requiring one before December 19, 2026. In California, plan for no job-training repayment in contracts signed from January 1, 2027. In Colorado, Washington, and Wyoming, follow the limits above.
2. Use a separate document. Keep it apart from the job offer and handbook. In Colorado, give it to a new hire before they accept the offer, or to a current driver at least 14 days ahead, and have it signed.
3. Charge only real course costs. List each course, the vendor, and the amount you paid. Leave out wages for training hours, fees for your own procedures, and any quit fee.
4. Prorate it by month. Reduce the balance each month of service and never speed up payment when the driver leaves. Charge no interest.
5. Owe nothing on a layoff. Drop the balance if you end the job for any reason other than misconduct.
6. Collect like any creditor. Never hold back a final paycheck below the minimum wage or overtime due. Follow your state’s deduction rules, or ask for payment and send a bill.
7. Keep the file. Store the signed agreement, the course receipts, and the completion certificates in the driver file, next to the training records described in NEMT driver training. The hiring guide shows what else belongs in that file.

Treat drivers you pay as contractors the same way. California’s ban reaches anyone in a work relationship, the noncompete laws in Minnesota and Washington cover contractors, and a contractor label does not settle whether a driver is an employee. See NEMT drivers: 1099 or W-2.