Can an Employee Be Required to Pay Back the Cost of Their Training if They Quit?

Pay Back Employee TrainingIt is a common arrangement for an employer to offer to pay for an employee’s education or training, so long as the employee agrees to pay back some (if not all) of these costs if he or she leaves the company within a certain period of time. However, a former employee of a California steel plant recently sued after he was required to pay back the cost of his education – and he argued that these kinds of reimbursement agreements violate state law.

The employee, Floyd Case, worked as a laborer for USS-Posco Industries (UPI), which introduced a program allowing workers to be trained to become Maintenance Technical Electrical workers. The training was provided to each participating employee free of charge, unless an employee voluntarily quit his or her job within 30 months of completing the training. In that case, the employee would be required to pay back $30,000, minus $1,000 for each month the employee worked after the training ended.

Case quit his job two months after finishing the training, and was expected to repay $28,000. He filed a complaint, arguing that the reimbursement agreement he signed violated the California Labor Code, the California Business and Professions Code, and the federal Fair Labor Standards Act. Had the courts sided with Case, the result could have been disastrous for employers, as their reimbursement agreement contracts with employees could have been rendered invalid across the board.

However, Case’s complaint was dismissed at trial, and a California appeals court upheld the dismissal. The ruling, USS-Posco Industries v. Case, asserts that reimbursement contracts like the one signed by Case are valid. However, the ruling also makes it clear that there are certain types of reimbursement contracts that courts should not enforce.

Which Reimbursement Contracts are Valid, and Which Are Not?

The court held that the training program offered by UPI was strictly voluntary and optional, and thus UPI could enforce a contract requiring an employee such as Case to pay back the program’s costs. The court pointed out that Case:

  • Did not incur any losses or make any expenditures when he took part in the training program, as it was paid for entirely by his employer,
  • Was not required to participate in the program,
  • Had other ways of securing a position as a Maintenance Technical Electrical worker, such as devising a training program of his own, or taking the test without a training program, and
  • Understood that he would be required to pay back the costs of the training if he quit his job within 30 months of completion.

If, however, an employee was required to make expenditures in order to perform his or her job, the employer would not be able to recoup these expenses from the employee – even if the employee signed a contract agreeing to reimburse the employer. An example offered by the court is In Re Acknowledgement Cases, in which Los Angeles police officers who quit their jobs after less than five years on the force were required to reimburse the city for their training costs. The policy was ruled impermissible at court, because the officers were required to undergo the trainings.

Are You Responsible to Pay Back Employer Paid Training?

If you believe that you have wrongly been stuck with paying for the cost of work-related training or education, you can contact the experienced employment and labor law attorneys at Beck Law P.C. in Santa Rosa. You can call or email their office today to schedule a consultation.



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