RECOVERY OF TRAINING FEES
Employers often find themselves in a position where they
have recruited an employee and spent a considerable amount of money on training
them, either by sending them on external courses or by assisting them in attaining
a professional qualification, only to see the employee leave shortly afterwards.
This situation is often made far worse when the employee leaves the employer
to join a competitor who then enjoys the benefits from the training without
incurring the costs.
Training Fees as “Loans”
In order to redress what some employers might see as the
inequity of this situation, it is becoming an increasingly common practice
amongst employers to attempt to recover these costs from employees who leave
employment shortly after they have undertaken such training. The usual method
adopted is to include a repayment provision in the contract of employment whereby
the training costs are “deemed” to constitute a loan to the employee
which is repayable if the employee leaves employment within a certain period
after the course or training ends.
In fact, provisions of this nature should be contained in
a separate agreement to the contract of employment. This is to ensure that,
as far as possible, the validity of a separate loan agreement for the recovery
of training fees will not be affected if the employer has deliberately or inadvertently
breached the contract of employment.
Genuine Pre-estimate of Loss or a Penalty?
Employer’s must be cautious to ensure that the amount
of costs which the agreement permits the employer to recover is a genuine pre-estimate
of the damages which the employer has suffered. Otherwise the provision for
recovery of costs will be construed as a penalty against the employee which
is unenforceable. Accordingly, if the employer has derived some benefit from
the employee undertaking the training course or attaining a professional qualification
during the fixed repayment period (e.g. where an employer has been able to
charge customers more for an employee’s services by virtue of that training
or qualification) then the amounts which may be recovered from the employee
should be reduced to reflect that benefit.
The agreement should also contain a sliding scale of repayment
whereby the amount which is to be repaid reduces according to the length of
time the employee remains with the employer after the training has been completed.
Equally the training fees should also become repayable on the same sliding
scale if the employee is dismissed during the repayment period for gross misconduct.
Right to Deduct from Wages
Finally employers will wish to avoid the time and expense
of resorting to the courts to enforce their right of recovery against an employee
under the agreement. In order to do this a provision should be included in
the agreement allowing the employer to deduct monies owed under the agreement
directly from the employee’s salary or any other payments due to the
employee on termination (including bonus, and any accrued holiday pay owing
etc.). However, the employer may still need to pursue court action if there
is a balance remaining.
The right to deduct monies from the employee’s salary
or final payments must contain the following provisions:
(i) the employee must have signified in writing his agreement
to the making of such deductions; and
(ii) there must be a clear statement that the deduction is to be made from
the employee’s wages; and
(iii) the employee’s agreement must relate to the deduction being made
from that source.
An employer must ensure that the above provisions are drafted
correctly. As a cautionary note to employers, if a Tribunal orders an employer
to repay any amount to an employee on the basis that there was an invalid deduction,
the employer then loses the right to recover the money in any other way at
all. It is therefore essential that professional assistance is sought if an
employer wishes to ensure full protection.