It is not uncommon for employers to invest in employees off-the-job training, to improve their skills and performance, and to build retention in the business.
In order to protect their investment, it is common for employers to introduce clauses in employment contracts relating to the repayment of fees, setting out their ability to recover the cost of such training if an employee leaves either part way through or shortly after completing the training. However, whether or not those clauses are enforceable has recently come under scrutiny in the Court of Appeal decision; Geeks Ltd v Watts.
In this case Mr Watts had signed a training agreement setting out his obligations to repay the first six months of his training. The figure provided by the employer however was not reflective of the actual training cost and the repayment obligation did not reduce until Mr Watts had completed 12 months of service. The provision applied regardless of any reason for leaving, except in cases of redundancy. Mr Watt’s resigned after eight months, and his employer sought to recover the full balance of training costs.
In this case the Court considered the clause and whether the practical implications of the financial penalty would be too restrictive on Mr Watt’s and his future career prospects. Whilst it was accepted that the employer had an interest in protecting their investment, it was concluded that the clause in question went beyond what was necessary to protect that interest.
This decision does not prevent employers from recovering training costs. However, it does emphasise the practical effect of a training repayment clause that will be considered moving forward.
If any repayment provisions do impose a significant financial burden on an employee, it may be unenforceable if this goes beyond what is reasonably necessary to protect the employer’s legitimate interests.
Following this decision, it is advisable for employers to carry out a review of any existing training repayment clauses.
If you are paying for employee training that goes beyond the standard training, we would recommend a separate training agreement covering all of the relevant points identified in this case, including ensuring specific training costs are clearly identified and that the repayment requirement is appropriate and proportionate to the value of the training provided.
This agreement should be negotiated with the employee and signed off before you book and pay for the training course.
If you are concerned that your employer may seek to recover training costs and this financial burden is something that is preventing you from seeking further employment, we would encourage a review of any clawback provisions or training agreements.
If it is the case that no agreement has been entered into prior to the commencement of the training, or the provisions are exceptionally restrictive, you may be in a position to challenge any attempted recovery by your employer.
Our team are able to assist with a range of enquiries and HR support. If you are an employee being pursued for training costs or if you are an employer looking for support with contract reviews or training agreements, please contact our team for further support.
You can read the full judgement in Geeks Ltd v Watts here: Geeks Ltd v Watts.
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The information contained in this blog post is provided for guidance and is a snapshot of the law at the time it is written. It is provided for your information only and should not be used as a substitute for obtaining legal advice that it specific to your particular circumstances.
The guidance should not be relied upon in any decision making process. It is strongly recommended that you seek advice before taking action.
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