In response to the competitive job market and the widening skills gap, many employers are choosing to develop needed job skills by investing in training for current employees or offering training as an incentive to attract new employees.
In this way, employers can create the skilled workforce needed to maintain and expand their business, while employees can learn valuable new skills and advance in their careers.
But training can be costly—as much as $50,000 for specialized programs. What happens if the employee quits before the company benefits from its training investment? Can employers seek reimbursement?
Some companies may want to require employees to sign reimbursement agreements that allow the employer to recoup expenses if a worker quits within a certain period of time. But if the agreement isn’t drafted properly, there could be a legal risk. These agreements should be considered contracts and reviewed by an attorney.
Here are some important questions to consider:
- Is the training voluntary and portable? The courts are less likely to find such reimbursement agreements enforceable if the training is mandated by the employer and applies to a specific job at that company. Employees generally may be required to repay the company for the cost of training that is portable, such as a certification.
- Are employees informed? It’s recommended that employers provide workers with a copy of the repayment agreement before the training program begins. Obtaining a signed copy can help prove employees were aware of the agreement.
- Are the details spelled out? The agreement should specify the training cost, the length of time the employee must continue working for the company after completing the training, and the repayment requirements that apply if the worker leaves the organization before the specified time. Many employers include a prorated repayment schedule in which the amount to be reimbursed decreases the longer the employee stays with the organization after the training is completed.
- Is the agreement legal? It’s wise to review federal, state and local laws and collective bargaining agreements to determine whether they would prohibit the company from recouping its training costs. Requiring hourly workers to pay back such costs could violate minimum wage or overtime laws. Deducting training costs from exempt employees’ pay could violate the Fair Labor Standards Act’s salary basis test.
Some employers decide it’s not worth the cost and legal risk to try to recoup training expenses after an employee has left. Even if the legal risk is minimal, employers may want to consider how pursuing a former employee in court will affect morale among those who remain.
Victoria Neal, SHRM-SCP, is an HR Knowledge Advisor for SHRM.
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