Earlier this year, the Second Court of Appeals ruled that an employee had to repay 1/3 of his salary to the employer as a reimbursement for training costs when he decided to leave. The employee argued that the reimbursement agreement contained in his offer letter was unconscionable (legal term for “patently unfair”) and against public policy, but the Court of Appeals rejected both of these arguments in upholding the trial court’s award.
In Sanders v. Future com, Ltd., Sanders signed an offer letter from Future com that stated that he would be responsible for repaying the company for any training provided to him by Future com if he voluntarily left the company within one year after completing such training. The repayment included travel expenses and “salary paid for study or course time.” Sanders left Future com within twelve months of receiving certain training but refused to repay $4,003.39 in travel costs and expenses and $34,476.96 in salary that Future com paid Sanders while he was being trained. The company sued him for breach of the employment agreement.
Sanders argued that the training reimbursement provision was not enforceable for a host of different reasons, but most notably, because it was unconscionable and against public policy. The Court of Appeals rejected both of the reasons findings that:
- The repayment provision was meant to protect the company from the loss of Sanders’ employment before it had the opportunity to recoup its costs from training him.
- The company had a legitimate interest in making sure that it was not training employees for its competitors.
- The company did not have to show that it actually suffered loss form Sanders’ departure.
- The repayment provision was clear and understandable and was not hidden so as to create an “unfair surprise” for Sanders.
- Since training repayment provisions have been found to serve public good, this provision was not against public policy.
TAKEAWAY FOR EMPLOYERS: Generally, training repayment provisions in employment agreements are enforceable in Texas. Employers should make sure that such clauses are written in a clear and understandable manner and are not hidden within employment contracts.
When determining the parameters of the reimbursement policies, companies should make sure that they comply with the Texas Texas Free Enterprise and Antitrust Act of 1983, which prohibits the restraint on trade. In the case above, it appears that the company provided significant amount of training that took up to 1/3 of employee’s working time. In such circumstances, a reimbursement clause may be more enforceable than where a company provided minimal training. Thus, when drafting a training reimbursement policy or agreement, it is best to consult with a qualified attorney to make sure that it is enforceable.
Leiza represents companies in business and employment litigation. If you need assistance with a business or employment dispute contact Leiza for a confidential consultation at Leiza.Dolghih@lewisbrisbois.com or (214) 722-7108 or fill out the form below.