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Is it pay back time...?

28th November 2013

As an employer we place great value on personal development and training of our staff. As part of our on-going commitment, we recently paid £1,000 for one of our employees to attend a training course. However, soon after her training was complete she handed in her notice. Can we recover the cost of the training?

Deductions can only be made if they are authorised either by statute, the employee’s contract or by a signed authority from the employee to make the deduction. Unless you have obtained prior authorisation it is likely that any deduction will be unlawful and, if so, the employee will be entitled to bring a claim of unlawful deduction of wages.

Furthermore a recent case (Cleeve Link Limited v Bryla UK EAT) has highlighted that not only do you need to ensure that you have authorisation to make the deduction, but that the deduction is lawful. For this to be the case, it must not be a ‘penalty clause’. A ‘penalty clause’ is a clause which deters a party from breaking the contract by providing for an excessive fixed amount to be payable on breach, which does not in fact reflect a genuine estimate of the potential loss.

Prudent employers should therefore:

  1. Have a contract of employment that contains a comprehensive deduction from wages clause, ensuring (where relevant) that deduction is possible from any salary payments after notice has been given and any outstanding payments due to them on termination;
  2. Ensure the clause states it is intended to be a genuine estimate of the loss incurred by the employer (this may prevent the employee from being able to argue it was intended to have a deterrent effect);
  3. Ensure the clause has a time-based sliding scale of deductions;
  4. Ask the employee to enter into a separate training agreement when they undertake specific training so that they know and understand exactly how much they would have to pay in the event that they resign their employment;
  5. Ensure that all employees sign and return the contract or separate agreement - this is key!

The contents of this update are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this update. © Mundays LLP 2013.

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