Could your training repayment clause be unenforceable?

Many employers invest significant amounts in training their employees. It’s therefore understandable that businesses want to protect that investment if an employee leaves shortly afterwards.

A common way of doing this is through a training repayment clause, requiring an employee to repay some or all the training costs if they resign within a specified period.

However, a recent Court of Appeal decision serves as an important reminder that simply including a repayment clause in a contract does not automatically make it enforceable. The case involved an IT company that sought to recover more than £8,000 from a trainee who resigned after accepting a higher-paid role elsewhere. Under his contract, he was required to repay the full cost of training if he left within 18 months of completing it.

Whilst the employer had been successful in the lower courts, the Court of Appeal ultimately ruled that the repayment clause was unenforceable.

The Court found that the clause went further than was reasonably necessary to protect the employer’s legitimate business interests. Importantly, the employee would have been required to repay the costs regardless of why he left, unless he was made redundant. The Court also noted that, once the repayment obligation was considered, the employee’s earnings were effectively reduced to a level comparable with an unpaid internship.

This does not mean employers cannot recover genuine training costs. Far from it. Properly drafted training repayment agreements remain an effective way of protecting investment in employees. However, they must be reasonable, proportionate and reflect the actual cost incurred by the business.

Clauses that seek to recover excessive amounts, apply regardless of the circumstances, or operate more as a penalty than reimbursement are far more likely to be challenged.

If your contracts contain training repayment clauses, now is a good time to review them. Many businesses rely on wording that has been carried forward for years without considering whether it would stand up to legal scrutiny.

A well drafted training agreement should protect your investment without creating an unreasonable barrier to an employee changing jobs. Getting the wording right at the outset is far more cost effective than attempting to enforce a clause that ultimately proves unenforceable.

If you have any concerns about this subject contact us at enquiries@121hrsolutions.co.uk and we can discuss.

Could your training repayment clause be unenforceable?

121 HR Solutions Ltd