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3-04-2019

A while ago I wrote a post about the repayment of training costs and it appears to have hit a nerve. 

I must receive half a dozen enquiries a week from employees keen to avoid having to repay anything to their employers. The article on the MB website also gets several thousand hits a month. (You can read it here).

This time I am writing from the employer’s perspective, expanding the theme and updating it.

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What should an employer consider if an employee wants to leave but owes training costs?

Contact me for more information about our fixed fee service to recover training costs by emailing me here, or calling me on 0207 539 4147

It is unarguable that staff are expensive. There are recruitment costs and the lead in time it takes before an employee is fully integrated into a business and is paying their way. On top of this, for some industries there are continuing training requirements, certification costs (just ask any law firm manager about that one) and the natural desire of staff to better themselves through professional development. Quite reasonably, employers want a return on their investment before the employee chooses to move on.  Further, there is a potential loss to an employer where having accepted an offer of employment the employee doesn’t turn up, or where an employee who has started work fails to work their notice period for no good reason.

If an employer hopes to recoup any part of the expense they are put to, then they need to ensure that there is a written agreement. Typically this will be in the contract of employment and ideally the relevant clause will also provide that relevant costs can be deducted from any salary or other payments due to the employee. Deducting anything without a written agreement can lead to a claim by the employee for an unlawful deduction of salary.

Occasionally, an employee will argue that a repayment clause is a penalty clause and therefore unenforceable. This however is a hard argument for an employee to run.

Historically the advice would have been that a clause is likely to be construed as a penalty if the sum the employer seeks to recover is disproportionate to the loss it is likely to have suffered. 

Even then, certain repayment provisions would have been hard to resist if they were drafted correctly as the Courts generally seemed to accept the position that such clauses were liquidated damages provisions and not penalties.   

The Supreme Court in the cases of Cavendish Square Holding BV v Talal El Makdessi (El Makdessi) and ParkingEye Ltd v Beavis [2015] UKSC 67 (ParkingEye), then moved away from the idea that loss needed to be directly proportionate to the sums the employer was seeking to recover stating that a clause was only likely to be a penalty and thus unenforceable if it imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party. 

It nevertheless remains good advice that the more proportionate the sum the employer seeks to recover,  the more likely the court is to enforce the provision.

So what clauses might an employer legitimately consider?

  1. Repayment of Training Fees
    - Keep it proportionate to the actual out of pocket expense incurred.  
    - Try to avoid nebulous ‘on the job’ training costs which are not directly referable to actual costs incurred.
    - Consider a sliding scale of payments having regard to how long the employee remains in employment after the costs have been incurred by the employer.
    - Consider forgiving the requirement for repayment if certain conditions arise e.g. if the employee is made redundant.
     
  2. Payment in the event that an employee fails to work notice
    Make the payment directly referable to the amount of notice the employee has failed to work e.g. deduct a sum equal to a day’s pay for each day of notice they failed to work
     
  3. An employee fails to join an employer having accepted an offer of employment
    - Make the sum referable to any lost recruitment fees or notional management time
    - In the case of professionals it may be possible to make a clause referable to revenues/fees that it was anticipated the employee might generate.
    - It is obviously difficult to assess exactly what an employer will lose should an employee renege on an offer of employment. Clauses which have claimed 50% of the salary an employee would have earned for the period in question have been enforced.

If the salary payments are insufficient to cover the debts due then it may be possible to recoup the balance through court proceedings if necessary.

Contact me for more information about our fixed fee service to recover training costs by emailing me here, or calling me on 0207 539 4147

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Standout firm known for its personal insolvency work for clients including private companies, individuals and governmental institutions. Frequently acts for insolvency practitioners, assisting with the realisation of assets, both in the UK and abroad.

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