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Can Consumer Law Protect Workers?


Jonathan F. Harris (@LawProfJHarris) is Associate Professor of Law at LMU Loyola Law School Los Angeles, a senior fellow of the Student Borrower Protection Center, and a grantee of the University of California Student Loan Law Initiative.

In February 2021, BreAnn Scally decided to take a job as a groomer at her local PetSmart. The job, which pays on average $14.80 per hour, advertised its “Grooming Academy” as an added perk: “FREE Paid Training” that is valued “at $6,000.” BreAnn had always loved dogs and was excited to begin her course of instruction. In reality, however, the so-called “training” that PetSmart required of all inexperienced groomers was minimal, and the manager quickly assigned BreAnn to groom pets for paying customers. The job itself proved to be similarly disappointing. Due to unsustainable working conditions, including short staffing that led to an overwhelming workday, BreAnn quit.

Yet, as she would discover, BreAnn was not yet free of her employer: PetSmart soon sent a debt collector after her for $5,000 for her training plus another $500 for tools that PetSmart required groomers to purchase. When she had been hired, the company had her agree to repay the cost of her “training” if she left in the first two years. Still in the process of paying off her student debt, BreAnn’s credit was now ruined.

A growing number of employers in high demand sectors like transportation, health care, retail, and finance are now requiring the kind of contract clause that BreAnn had signed, known as a Training Repayment Agreement Provision (TRAP), to discourage workers from quitting. In fact, major employers rely on TRAPs in sectors that collectively employ over a third of all private-sector workers in the U.S. For example, a 2022 survey reported that almost 45 percent of responding new nurses with between one and five years of experience were bound by TRAPs, often with repayment amounts exceeding $10,000. Companies are also using TRAPs as workarounds for other sorts of mobility-restricting contracts, especially as regulators and legislatures crack down on traditional non-compete agreements. Meanwhile, courts have routinely rejected legal challenges that claim the TRAPs violate employment laws, such as wage-and-hour laws and non-compete limitations.

There is, however, another legal mechanism to stop harmful and mobility-restricting TRAPs: consumer law. In BreAnn’s case, PetSmart engaged in unfair and deceptive acts and practices (UDAPs)—prohibited by consumer law—by, among other things: advertising the Grooming Academy as “free” when it was not; requiring a repayment amount far exceeding the value of the “training” to workers; and representing that the TRAP debt was collectible when it was not under state law. In fact, consumer law can be a powerful tool for workers in all sorts of harmful situations, from exploited gig workers framed as “consumers” and “customers” of the platforms’ services, to immigrant commercial janitorial workers classified as “franchisees” and sold marketing and operational management services under false promises of high earnings. When firms treat workers as their consumers by selling them services and credit products, the workers become worker-consumers and consumer law becomes work law. Specifically, consumer UDAP laws can fill voids left in contract and employment law protections that no longer serve many of today’s workers.

In Consumer Law as Work Law (forthcoming Calif. L. Rev. 2024), I describe both the possibilities and challenges of turning to consumer law as part of an integrated work law to help remediate the bargaining power asymmetries between firms and workers. The article makes three contributions to law and political economy scholarship. First, it builds a nuanced story of the modern employer-worker relationship, identifying several rapidly growing tactics firms are using to deceive and trap workers. Those include TRAPs, deceptive franchising schemes that trap workers in debt, and temporary staffing agencies that hire workers as what Erin Hatton calls “permatemps,” despite promises of “temp to perm” positions. Second, I argue that as firms treat workers as consumers, so, too, should consumer law. Third, I turn to work law more broadly, probing the promise and pitfalls of consumer law as work law, and considering the broader implications of an integrated work law.

A handful of scholars have recognized the untapped potential of consumer law, including Rory Van Loo and Luke Herrine. And notably, during the past year, the FTC and Consumer Financial Protection Bureau (CFPB), rather than the Department of Labor or National Labor Relations Board, have received abundant attention for using their tools to address economic subordination in the workplace, even if in in the name of promoting competition or protecting workers from employers’ harmful consumer financial products.

The FTC, for instance, just issued a Notice of Proposed Rulemaking that would ban all non-competes, as well as “de facto” non-competes like TRAPs “where the required payment is not reasonably related to the costs the employer incurred for training the worker.” Likewise, the CFPB announced in 2022 that it intends to flex its muscles in instances of employer-driven debt, seeking comments on the Bureau’s authority to regulate consumer financial products like TRAPs that purport to offer training services and turn employers into creditors.

Unfortunately, the FTC’s proposed rule language currently provides employers with a gaping loophole, as it would permit TRAPs where the repayment amount is “reasonably related” to the employer’s training costs. But an employers’ failure to justify repayment amounts is only one of the many problems with TRAPs; the proposed rule does not consider that many TRAPs provide training of little value to workers, have unreasonably long repayment periods and high repayment amounts relative to a worker’s pay, are required by employers, and ultimately lock many workers into their jobs. Nonetheless, the proposed rule is a clear signal that the FTC will vigorously exercise its authority in labor markets—a continuation of the FTC’s exercise of its unfairness authority among employers and job training providers, dating back to the 1930s. If the FTC doesn’t close the TRAP loophole described above, the CFPB should do so under its rulemaking authority.

Certainly, consumer law is no panacea, and legal scholars rightly criticize its primary remedy—disclosure—as somewhat toothless. Moreover, there are other risks of framing workers as consumers. During the 1930s, for instance, parts of the labor movement advocated for removing workers from the consumer paradigm and reframing workers as workers first under a class-centered analysis. According to this argument, workers should be viewed as producers and jobs should be viewed as the production of labor for compensation, rather than as the provision of consumer services. Indeed, state and federal laws and court decisions banned payment of wages in scrip, and the modern employer welfare state emerged from regulations meant to frame health insurance and retirement benefits as forms of compensation, rather than as consumer financial products that firms sold to workers.

These concerns are sound but should not push us to reject consumer law entirely. Firms have shaped and then deployed contract and employment law against workers in reorienting labor markets to their advantage. Firms also amplify what William Novak and Martha Albertson Fineman call, respectively, “American exceptionalist narratives” of—and a “fixation on”—individualism, autonomy, freedom of contract, and self-betterment to break down traditional industrial relations and evade legal liability. Workers, collectively and individually, need a counterbalance, and there is no inherent inconsistency in applying multiple legal doctrines, including consumer law, as part of an integrated work law.

Moreover, an integrated work law can help employment law and consumer law learn from and strengthen each other to adapt to new terrains—a sort of paired evolution. For example, the growth of collective action among medical and student debtors through “unions” like the Debt Collective shows how consumer law could adopt from labor law a collective rights regime: a National Labor Relations Act for consumers. In addition, taking inspiration from employment laws that prohibit employees from waiving their rights to the minimum wage, and to freedom from discrimination and sexual harassment, consumer law could add non-waivable substantive protections. Moreover, consumers who labor in generating content for social media and data brokers could look to employment laws for protections from exploitation. Going in the opposite direction, worker advocates could turn to consumer UDAP laws to stop mandatory arbitration provisions with class waivers that harm both workers and consumers.

One final reason for an integrated work law is that it prevents employers from skirting the regulations through creative classification. BreAnn Scally, for example, ultimately filed a class action law suit against PetSmart for its TRAP, providing a blueprint for using a hybrid of consumer law and employment law claims to stop exploitative practices. If PetSmart argues the “Grooming Academy” was primarily for its benefit, then the TRAP would constitute an unlawful kickback of wages under wage-and-hour laws. On the other hand, if PetSmart argues the training was primarily for the workers’ personal use, then it would be liable under consumer UDAP laws. PetSmart can take its pick, but the suit’s innovative claims show that PetSmart was breaking the law either way. This is the sort of integrated work law that will be necessary to counter firms’ consolidation of bargaining power in the modern labor economy.

Disclosure: The Student Borrower Protection Center has provided legal assistance in the Scally v. PetSmart litigation.