The Employment Experience

Requiring Employees to Repay Training Costs- is it legal?

September 29, 2022 Karly Wannos
The Employment Experience
Requiring Employees to Repay Training Costs- is it legal?
Show Notes Transcript

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You hire an employee and spend thousands on dollars on a training program so they can work in the specialized department at the company. Less than one year later, they quit and go to work for your competitor- taking the knowledge and skills from the expensive training the company paid for with them.

Can the company require the employee to repay the training costs? Does this serve to prevent them from leaving? Is this legal?

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So you hire an employee and you put an extensive amount of time and money and energy into training this person with regard to the particular job or your particular field. This might be a highly skilled area. And the employees that you are hiring have to be trained so that they can stay with your company.

Know the ropes of your company, know the ropes of their area and stay for the long term. Or you might be hiring young employees straight out of school who need the training, but since they're new to the field, they don't have the background and skill set necessary for the job. Either way they need training and it's costly to your company.

A problem arises when you spend the money to train the person and then your competitor poaches them immediately after they're trained a problem arises. When you spend all the time and money training this person, just for them to turn around and leave one year later. All of the time and money that you spent in the training is essentially gone and you need to hire an employee and start the process all over again.

How do you, the company take steps to prevent that? And can you require the employee to repay the training costs? If they leave employment with your company too soon on this episode, we are discussing how you can take steps to prevent that. And if you can require the employee to repay you the training costs, if they leave too soon, you are listening to the employment experience podcast.

I am your host employment attorney, Karly Wannos . This podcast is focused on providing valuable educational information, best practices and actionable tips. So your workplace can better work for you. Each employment experience episode is a mini educational training or informative interview designed to help businesses learn about important employment related strategies.

If you are a business owner or human resources professional, who wants to stay on top of issues affecting your business and. Then you are in the right place. Let's get to work. The information in this episode is for educational purposes only. Please be sure to consult with legal counsel before making important employment related decisions.

Many employers want to invest in training for their employees, or they absolutely need to. The company might not be engaged in a specialized area and might need its employees to be properly trained in order to perform the job training. On the job training can support both the company and the employee, the.

Employer can have very, a very skilled workforce that is needed while the employees who receive the training can use this to advance their career. However, training is really costly for specialized programs. It costs money to the company. It might take time away. From the employee's regular job that they would otherwise be performing.

And the employer needs to pay the employee during that time that they're not performing their job, but they're engaged in the training. So typically not only does the company have to pay for the training, but it also has to pay for the employee's time in doing so. So it's, it's a huge cost to the company and it's understandable that the company might not want to front.

This huge cost of an, an investment only to have the employee turn around and leave a year later. This is especially true. If the employee turns around and leaves a year or a short time later, and possibly takes that specialized training that your company has paid for it to perform to another company or another competitor.

So if you want to offer specialized expensive training to your employees, but don't want them to turn on and leave and you certainly don't want them to go to your competitor. What exactly can you do? What steps can you take to potentially prevent this from happening or at least deter it from happening and best practices to consider?

So first, the company will want to consider a, an agreement, some type of reimbursement agreement between the company and the employee, but the catch is to make sure that it's properly drafted. Right? So obviously it's going to be best to have it drafted and reviewed by a lawyer. And here are some key considerations that you'll want to.

Into account. Number one is the training voluntary. So if it's not voluntary, if it's a requirement that the company is putting in place for the employee, then there is a better chance that the company will be able to recoup that cost. So if it's a voluntary training that the employee doesn't necessarily need, but the employee wants to have maybe to add to his resume or like make his resume.

Seem a little bit more robust, then it would be considered voluntary and not required. And the company will have a difficult time getting reimbursement for something like that. Number two, is it portable? Is this a type of training that the employee can take to another company and use at another company again, bolstering the resume and increasing the potential skillset to go work for someone else?

And if the answer is yes, then there's a greater chance that the company would be able to recoup this cost. If the employee leaves, the next thing you'll wanna consider in the contract is, is there proper notice of repayment? So is it, is it made clear, is the language made clear in the agreement that the employee will have to pay this amount of money back?

And are they aware of it? Obviously it can't be hidden be beneath paragraphs and paragraphs of legal language, such that the employee has no idea that this is something that. They might need to pay back in the future. And what goes along with that is whether or not the agreement includes all the payment details.

So you'll want to make sure that timing is in there. How long does the employee have to complete the training? Number one? What happens if the, when is the repayment schedule triggered? So if the employee leaves after one year, does it have to pay it back? If the employee leaves after two years, does he then have to pay it back, make sure that you include the length of time for the reimbursement of the training costs and also a repayment schedule.

So is the entire cost to. Reimbursed immediately within a certain amount of days of resignation or does the repayment, or is there a repayment schedule that sets out another manner in which the payments are going to be made back to the company next you want to include? What happens if the employee leaves before the training is completed?

So let's think about if it's a year long training program and the employee leaves after one month. If it's, let's say a $50,000 program and the employee only completes one 12th of it. So he only stays for a month. It might not be fair for the company to require repayment of the total cost of $50,000.

When a majority of the training was not even taken by the employee. So those are the most important things to consider with regard to the repayment schedule. Also keep in mind that since this agreement is going to have to be presented to the employee at the time that they are hired, they will probably want to review it.

Actually, they absolutely, they absolutely will want to review it and should review it. And it's important to make sure that they think it's fair as well. Right? Because you're trying to hire this person. If you're presenting them with a document that seems unfair to them, which might potentially require them repaying back $50,000 for a training, they really never attended.

This. Might deter them from agreeing to work for your company. Just something to keep in mind. The next thing to consider after the repayment schedule is whether or not this repayment will cause the employee to drop below the minimum wage. So as you know, all hourly employees, all hourly non-exempt employees must be paid.

At least the minimum wage for all hours worked in a work week up to 40 and time and a half for all hours worked in a work week over 40. So if, depending upon how much the employee is earning. If the repayment of the cost of the training causes their hourly wage to fall below minimum wage, this could be a problem as well.

There could potentially be implications under the FLS a for this type of agreement. So those are the main ones you'll want to consider. You'll also want. There are other considerations to take into place that are state specific. So if this is something that you are considering for your business, please be sure to consult with an employment attorney in your particular state.

Because again, there might be state specific laws or rules, or these types of agreements might be subject to collective bargaining agreements or other agreements. So let me know, by sending me an email or a message on social media, does your company have. Required training for its employees. And if so, do you have them sign some type of reimbursement agreement so that if they leave too soon after training or they leave to go to one of your competitors after training that they need to repay the cost of the training?

Let me know. I'm interested to hear thanks so much for listening, and we will see you in the next episode. If you found the information in this episode, helpful, I would truly appreciate it. If you could share this with a fellow business owner or HR profess. And it doesn't cost anything to rate and review the show.

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