15 November 2013: If an employee asks to go on a training course, many employers will get staff to sign an agreement to repay all or part of the training cost if they leave within a certain period. Some employers will demand full repayment if the employee leaves within two years, even if the training is obligatory.
Employers do this because they invest in staff’s personal development, and want to get their money’s worth. Employees, on the other hand, sometimes feel that this traps them into staying for much longer than their contractual notice provisions require.
The EAT has provided guidance this week in Cleeve Link Ltd v Bryla on when a repayment clause may be enforceable. In that case the employer had reserved the right to claw back recruitment costs if the employee left within 6 months of joining.
The key question is whether the purpose of the clause was to deter the employee from leaving, or whether it represented a genuine pre-estimate of loss.
This requires a comparison of whether the difference between the amount that could be recovered for breach of contract and whether the fixed repayment is ‘so extravagantly wide of the mark – or, putting it another way, the gulf between them is so great – that is cannot be explained on any other basis than that it is a penalty to deter breach.’
Employers who want staff to agree to this kind of repayment provision would be wise to:
- Explain why repayment is necessary and how it is as a pre-estimate of loss;
- Only normally apply it for training that is not essential to the role;
- Reduce the repayment by (say) a twelfth or a twenty-fourth for each month worked following the training;
- Reserve the right to claw the money back from salary due;
- Get the employees’ signature on the agreement.