Getting your training money back (On law)

Employers may have the right to demand reimbursement of training expenses if an employee leaves

Whether or not an employer can demand repayment of training expenses varies depending on specific legislation in each province. However, any legislation that allows an employer to demand repayment of expenses requires a written agreement between the employee and employer.

Ontario’s Employment Standards Act deals specifically with the deduction of wages. It allows an employer to demand repayment of certain expenses if the employee has provided written authorization referring to a specific amount or formula from which the amount can be calculated. Other provinces, such as Alberta, and the federal government have similar provisions in their labour and employment legislation. However, this is not uniform across the country (British Columbia does not permit such deductions) and it is important that an employer refers to specific legislation in the appropriate jurisdiction before attempting to enforce such an agreement.

Whether these expenses are repayable also depends on the benefit an employee receives from such training. In Renaud v. Graham, the employee was hired to work with a real estate firm in Ontario. Due to the nature of the job, he needed six months of training before he was licensed to practice real estate. His written contract contained a specific formula for the partial return of the cost of training if the employee voluntarily terminated his employment and worked as a realtor for another broker within one year of termination. This did indeed occur, not long after the training.

Despite numerous arguments as to why the specific terms should not be enforced, the court found the employment agreement met the requirements in the employment standards legislation. The agreement was clear, did not restrain trade, was agreed to without coercion and set out an appropriate formula to determine the amount due. The realtor was ordered to pay his former employer $23,387.

Based on the court’s findings in Renaud, employers must ensure the agreement meets all the requirements provided for by specific employment and labour standards legislation, does not contravene other legislation and ensure the employee fully understands the agreement and is not coerced into signing it.

Beyond this, the agreement cannot be tainted with unreasonable stipulations and the employee must receive some transferable benefit from the training. While the employee in Renaud received a very real benefit from the training (namely, to be licensed as a real estate agent), the employee in 889946 Alberta Ltd. v. Carter did not.

Management training was a requirement imposed by the parent company that did not result in the employee being able to find higher paid employment with a competitor following her resignation. Moreover, the employee’s remuneration was very modest, so the cost of the course amounted to four months’ salary. The clause was viewed as “heads we win, tails you lose” because it meant the employee was burdened with the cost of training without having any corresponding real benefit to her.

This is similar to the situation in Nygard International Partnership Associates v. Michalowski, where a Manitoba retailer took back one-half of the wages paid during the employee’s four-week training period, as stipulated in the employment contract.

The Manitoba Labour Board considered the fact the employee had not been given her training until after she had been employed for one month (during the busy Christmas season) and had been productive during that time. It also noted the cost of training in that case wasn’t a set number but was based on the estimate of two weeks’ wages. These factors, together with the employee not receiving any true benefit, made the training expenses an unacceptable deduction from wages. The deduction was viewed as an attempt to off-load business costs and therefore an unenforceable penalty clause.

There is a clear distinction between situations where training received is highly specialized and allows for the employee to “take it with her” when she goes (likely to a competitor) and training that is a mere cost of business, benefiting only the employer. In the first situation, applicable to the training received by pilots, real estate agents and the like, employees are hired with the thought they become qualified at the owner’s expense.

These qualifications would be transferable to positions with competitors should the employee choose to make the switch. Therefore, the repayment agreements are necessary to ensure the first employer isn’t paying for training that unfairly benefits the second employer.

However, in the second situation, where the training is only useful within the business run by that particular employer and the employee does not receive the benefit of a transferable skill, it is unfair for the employee to repay what is essentially a business cost. An employer must take a very honest look at the training it is providing and its real value to the employee before determining whether it can demand repayment of training expenses.

For more information see:

Renaud v. Graham, 2007 CarswellOnt 1173 (Ont. S.C.J.).

889946 Alberta Ltd. v. Carter, 2002 CarswellAlta 215 (Alta. Prov. Ct.).

Nygard International Partnership Associates v. Michalowski, 2005 CarswellMan 538 (Man. L.B.).

Brian Kenny is a partner with MacPherson Leslie and Tyerman LLP in Regina. He can be reached at (306) 347-8421 or [email protected].

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