Many employers invest heavily in training for their staff. It is understandable that employers would not be happy about paying for expensive courses if the employee could take their new qualification or certificate to a new job shortly after the employer had covered the cost.
If your contracts require staff to repay training costs if their employment ends within a certain period after you pay for their training (a ‘clawback’ agreement), a recent Court of Appeal decision may have important implications for you. In Geeks Ltd v Watts, the court struck down a training repayment clause as an unlawful ‘restraint of trade’.
Geeks Ltd, an IT services company, required Mr Watts to sign a Training Investment Contract’. It set a training cost debt of around £8,000, which was to be repaid if he left his job, for which he was paid around £18,000 per annum. The debt would only start to be reduced after 12 months’ service and would then be written off gradually. Mr Watts resigned after eight months for a better-paid role elsewhere, and Geeks pursued him for the money.
The Court of Appeal said that the clawback agreement was unenforceable because:
- the clause applied in almost any exit scenario except redundancy; and
- it was not clearly tied to what the training had actually cost; and
- it looked like a penalty for leaving; and
- It was an unlawful restraint of trade;
in other words, the debt was substantial enough to effectively prevent Mr Watts from resigning and finding a job elsewhere.
Training repayment clauses can still be used, but a blanket, one-size-fits-all debt is now a real risk. In order to be enforceable:
- The repayment requested should reflect what you have actually paid for the training. You should be able to provide a breakdown.
- The amounts which you request to be paid back should taper down over a sensible period (usually 12-24 months) in order to acknowledge that you have had some benefit from the employee having received the training. The more frequently the amount to be repaid is reduced, the fairer this is likely to be. For example, you could reduce the repayment amount after each month has passed, or after each three-month period. The costs should not remain repayable in full for any prolonged period.
- You should generally not require repayment for dismissals for circumstances outside the employee’s control, such as redundancy or a dismissal (after a capability process) for long-term ill health. Please note that the wording of such arrangements should be carefully drafted so that the employee is not excused from the repayments merely if they resign and mention that the reason for their resignation is related to their health.
If you would like us to check any existing training repayment or clawback clauses in your contracts or standalone agreements, please contact one of our HR Advisors by emailing hr@perspectivehr.co.uk or by phoning 01392 247436.