Companies Demanding a Recovery of Training Expenses from Departing Employees
“Pay us the $50K that we spent on your training” – a notice sent to an employee who quit her retail job had this written. This trend of organizations asking for the repayment of the money they spent on training an employee once they quit has been growing steadily, as per the report released by Reuters. Earlier, this kind of tactic was limited to high-value employees who got specialized training or certifications from their employers. However, since the past year – especially after the great resignation gained steam- even smaller companies belonging to industries like trucking or retail have started demanding repayment of training expenses.
The TRAP of Training Repayment Agreement Provision
Critics are terming such repayment agreements as Training Repayment Agreement Provision- or TRAP, in short. This explains the broader sentiment on this growing trend. Employees are especially worried because of the fact that even if an organization fires an employee, it reserves the right to demand repayment of training costs. Some people on the internet hinted at organizations using this as a money-making strategy pursued by unscrupulous organizations.
This tactic of cutting costs is further trashed by employees who took training paid for by their employers and saw that those training sessions were of poor quality. One retail store employee shared with us how his employer asked them to attend a one-hour online boot camp per day for one week in the name of training. Demanding hefty sums as reimbursement for such poor-quality training sessions would surely ruffle some feathers.
The Legality of Repayment Provision
States in the U.S generally don’t have any law that allows an employer to deduct any amount from an employee’s last paycheck as the repayment of their training given by the said employer. The only way an employer can enforce the training reimbursement provision is by adding a clause in the employment agreement.
- USS – POSCO Industries v. Floyd Case
Floyd Case, an employee at Posco Industries, enrolled in a three-year training program entirely paid for by the company on the condition that if he quit his job within 30 months, he would have to cough up the cost that the company incurred for the program. He resigned before the stipulated period, and the company sued him. Ultimately, the court sided with the company, and Case had to repay the cost of his training.
It is to be noted that Case invoked Labor Code sections 2802, 2804 and 450 and Business and Professions Code section 16600 – all of which proved insufficient to hold Case’s argument.
The Gray Area
The problem arises when organizations try to recoup training charges from employees who, instead of voluntary quitting, get fired. When the LAPD tried to recoup such charges from police officers, their agreement clearly stated that only those police officers had to repay training charges who voluntarily quit. Although the LAPD lost the case in court, we must praise the department for not misusing the agreement by forcing fired police officers to reimburse the LAPD for the training.
Arguments for and Against Training Reimbursement
People in favor of reimbursing organizations for the training given argue that companies spend a huge amount of money training employees. As per statista, the total corporate training expenditure in the U.S was 92.3 billion dollars. Companies spend 700 to 1400 US dollars per learner. Hence, organizations are right in demanding reimbursement from departing employees.
People against the training reimbursement agree that employers are right when they say that “If we pay for further enhancement of your knowledge that will help you in your career even outside of your present employment, you have to work for us for a certain amount of time”. Where they disagree is when companies ask for reimbursement for training which concerns the internal procedures of that company alone – then it is wrong. In other words, any training that is helpful only in the present company should be paid for by the company itself because such training has no value outside of that company.
The corporate in the United States is going through an interesting situation. On one hand, thanks to the stimulus checks received during the pandemic, people are not desperately looking for jobs. The demand for employees is higher than the supply. Hence, they have bargaining power. On the other hand, despite the higher demand for employees, the working conditions in many industries are dismal. The result? High attrition rate. And high employee turnover proves to be costly for companies. As a result, they are trying everything that’s legally possible to prevent employees from quitting.