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.
The Interactive
Law Group