May employers recoup costs incurred during the hiring, training process?
Here is an all-too-familiar scenario:
A great job candidate sailed through the interview process. The company invested in this candidate by paying for several different background checks and putting the employee through a training program, perhaps even put the candidate up in a hotel overnight, only to have the new hire quit within a few weeks of starting the position.
What kind of recourse does an employer have in a situation like that? Can some (or all) of the hiring and training costs get recouped? Maybe.
This is something a lot of employers struggle with. In many cases, turnover is simply a cost of doing business and cannot be avoided.
It might not be feasible to recoup all costs associated with the hiring process itself (such as paying for background checks), but it’s possible to try and recoup some training costs if an employee doesn’t stay with the organization for a certain time frame.
An agreement to repay training costs must be reasonable, though, both in the amount of money an employee would be required to repay and the length of time the employee would be required to stay with the organization to avoid repayment.
This “reasonableness” standard will vary based on the type of training provided and the nature of the organization. While it might be realistic to ask an employee of a fire department to stay for three years or repay $5,000 in training costs, it isn’t likely to be reasonable to ask the same of a restaurant server.
Employers should also consider the potential difficulty involved in collecting the money owed by a former employee. State laws usually do not allow for those kinds of deductions from final wages.
If an employer decides to adopt training reimbursement agreements, there are a few important things to remember:
- Voluntary. Training for which you’re seeking reimbursement may need to be voluntary. When employees are required to do the training as a condition of employment, the courts have often held that costs are not reimbursable.
- Up-front agreement. Whether it’s a current employee or a potential new hire, any reimbursement agreement should be made prior to the employee beginning the training.
- Details. The agreement should specify the costs for training, how long the training will last, how long the employee is required to stay on the job following the training period, and what the repayment requirement would be.
- Compliance with federal, state, and local laws. Employers must make sure that reimbursements don’t cause minimum wage or overtime violations.
Recovering funds is a challenge, but training reimbursement agreements are sometimes enforceable. Employers will have to determine whether the recovery of training funds is worth the effort, cost of litigation, and possible fallout in employee morale.
It’s worth noting that some employers use reimbursement agreements only as a screening tool. They may not intend to recover training costs from employees but hope that only serious, committed candidates will go forward with the training after being asked to sign such an agreement.