Money, Money, Money…Must Be Funny…in the Employee Training World
Score one for the employers this year:
An appellate court decision issued last month determined that an employee who chooses to partake in the employer’s voluntary training program is required to reimburse the employer for related expenses if the employee does not stay with the employer for a “reasonable period of time” following completion of the program.
In USS-POSCO Industries v. Case, UPI faced a shortage of skilled Maintenance Technical Electrical (MTE) workers. To address this, UPI decided to implement a Learner Program. Accordingly, UPI and the representative union in the workplace entered into a Memorandum of Understating (MOU) which stated:
[D]ue to strong demand for [MTE workers] the Company needs to retain successful candidates as employees for a reasonable period of time in order to recoup the substantial $46,000 investment in their training. . .UPI may require candidates in the Learner Program to sign [a reimbursement agreement] that would require reimbursement for a portion of the training should a candidate voluntarily terminate employment within 30 months of completion of the Learner Program.
The employee (Floyd Case) signed a one page reimbursement agreement acknowledging UPI would pay his “wages, benefits and training expenses” while he was in the Learner Program, but there would be no guarantee participation in the program would ensure promotion, transfer, or continued employment with UPI.
He further agreed that if he was fired for cause or voluntarily left UPI within 30 months after completing the program, he would, absent a compelling hardship such as a serious injury or family death, refund $30,000 of the expenses of the training, less $1,000 per month of subsequent service at UPI.
Two months after completing the program, Case left UPI to work for a different company. When Case refused to reimburse UPI, the company sued for breach of contract and unjust enrichment. Case cross-complained, asserting the reimbursement agreement was unenforceable and UPI had violated the Labor Code and other statutory provisions in seeking reimbursement. Both the trial court and an appellate court sided with the employer.
In its affirmation, the Court of Appeal noted:
- Labor Code provisions re employer payment of costs of business operations do not apply in this case, as the training program offered by UPI was strictly voluntary and optional.
- Case did not make any expenditure or suffer any loss in direct consequences of the discharge of his duties. Rather, it was UPI that fronted the costs of his voluntarily training.
- Case had alternative options: He could have passed the MTE test without additional training or education, self-studied for the test, or completed the program and then passed the test. Case, however, chose the 3rd option “presumably because he would get training during the workday, would earn wages during the lengthy training period, and would obtain the training without any upfront cost and potentially without any cost at all.
- Finally, the Court also held the reimbursement requirement was not an invalid restraint on employment. The employee “voluntarily agreed to participate in the training program and understood UPI would front all the costs of the program and expected reimbursement of training costs if he chose to leave within 30 months. This was an agreement concerning advanced educational costs. It did not restrain Case from working for a competitor or any other entity…” […] “Repayment of the fronted costs of a voluntarily undertaken educational program, the benefits of which transcend any specific employment and are readily transportable, is not a restraint on employment.
Bottom Line for Employers
This decision centers on one main issue – UPI did not require the employee to participate in the program. Rather, it offered the option to employees who sought employment as MTEs as UPI thought it would benefit as well. Accordingly, UPI was entitled to seek reimbursement from employees who did not stay following completion of the program.
- Don’t label a required training program as “voluntary” – that will not allow you to seek reimbursement.
- Note that an employee’s participation in a mandatory training program might also count as hours worked.
Tal Burnovski Yeyni is an Employer Defense Attorney at our firm.