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Is it lawful for an employer to demand the repayment of training costs? The short answer is “yes” provided that there is a properly drafted agreement.

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It is not that unusual for employers to require employees to repay their costs of training or other professional fees that the employer has incurred on their behalf if they leave their employment. Occasionally, an employee will argue that this type of clause is a penalty clause and therefore unenforceable. However, a clause will only be construed as a penalty if:

  • It provides for payment of a specified sum by the employee in the event of his breach of contract; and
  • If the sum specified is disproportionate in comparison with the greatest loss that could possibly have been proved as a result of the breach

To avoid arguments that the repayment clause is a penalty employers should consider the following:

  • Making the period during which repayment may be demanded fixed, e.g. The employee only has to pay the training costs back if they leave within two years of completing the course.
  • Make the repayment subject to a sliding scale, because the longer the employee has stayed with the company, the greater the benefit the employer has gained from the training course.
  • Consider if it may be appropriate in some circumstances not to demand repayment e.g. where the employee is made redundant.

Ideally the employer will want the right to deduct any final training costs from any salary payments due to the employee.  If so this right needs to be expressly set out in writing, otherwise it runs the risk of being an unlawful deduction from salary.

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See our extract of a training repayment clause below:

Except in the circumstances set out in clause [    ] you shall repay the Employer as follows:

  • if you cease employment before you attend the training course but the Employer  has already incurred liability for the costs, [100]% of the cost or such proportion of the costs that the Company cannot recover from the course provider shall be repaid;
  • if you cease employment during the training course or within 12 months of completing the training course, [100]% of the costs shall be repaid;
  • if you cease employment more than 12 months but no more than 24 months after completion of the training course, [50]% of the costs shall be repaid;
  • if you cease employment more than 24 months but no more than 36 months after completion of the training course, [25]% of the costs shall be repaid.
  • You agree that any costs repayable under this clause [    ] may be deducted from your salary or other remuneration due to you by the Employer

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