DAVID ROYDEN - EMPLOYMENT SOLICITOR
UK EMPLOYMENT LAW

David Royden is a Partner with Laytons Solicitors and Head of Employment Law, Manchester, UK

Laytons Solicitors is a national law practice specialising in all aspects of Company and Commercial Law

Laytons Solicitors, 22 St John Street, Manchester M3 4EB.
Tel: +44 (0) 161 834 2100
Fax: +44 (0) 161 834 6862

Offices at London, Manchester and Guildford, UK

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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.

Conclusion

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.

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Employment Law Procedures - view section

Tribunal Claims - view section

Sample Documents - view section