Court of Appeal rules training repayment clause unenforceable

It is important to remember that every case turns on its own facts and this judgment does not mean that training costs can never be recovered from departing employees.

However, employers should carefully review any training repayment provisions to ensure they are reasonable and proportionate. In particular:

• Consider linking repayment obligations to genuine and identifiable expenditure, such as external courses, qualifications and certification costs. In this case, the employer sought to attribute value to mentoring, studying and internal coaching, which were not externally incurred costs.
• Ensure any repayment obligation is proportionate to the employee’s salary, seniority and length of service. Clauses that reduce over time are generally more likely to be enforceable because they recognise the benefit the employer has already received from the employee’s work following the training.
• Consider whether repayment should be waived in additional circumstances beyond redundancy. Greater flexibility is likely to assist in demonstrating that the clause is reasonable.
• Avoid provisions that effectively prevent employees from moving to alternative employment because the financial penalty for leaving is too significant. Arrangements that compel an employee to remain in employment are more likely to be viewed as restraints of trade.
• Consider encouraging employees to obtain independent legal advice before entering into significant repayment agreements. The Court noted that there was an imbalance in bargaining power and that the employee had not taken legal advice before signing the agreement.

Whilst employers can still seek to recover costs which represent a genuine investment in employee development, this case demonstrates that repayment provisions must be carefully drafted and no more restrictive than is reasonably necessary to protect the employer’s legitimate interests.