Repayment agreements on training costs: often agreed, often invalid!

Further training of employees not only serves them, but also the company, i.e. the employer. Especially in times when there is a shortage of skilled workers, employers offer their employees the opportunity to train or specialise.   However, further training involves considerable costs for the employer. In return, they expect their employees to commit to them for a certain period of time. Of course employers ultimately want to participate in the acquired qualifications of their employees. However, employees are basically free to leave the company at any time.

How can employers protect themselves in the event that they invested in further training of employee, but the employee leaves the company after completing the qualification measure?

Employers can put these interests into a so-called repayment agreement. This is intended to oblige the employee to contribute to the costs of training financed by the employer in the event that he or she terminates employmentship.

In practice very often repayment agreements are invalid because they unreasonably disadvantage the employee.

What must be considered when concluding a repayment agreement?

1. Professional advantage for the employee

The employee must have gained a pecuniary advantage through the further training or qualification measure. The pecuniary advantage can be measured in particular by a career advancement. As a result of the measure, the employee must be offered new professional opportunities and thus also higher earning potential. The employee must increase his market value through the qualification measure. This means that the employee can reasonably be expected to share in the costs or to repay the costs of further training if his or her professional advantage due to the qualification measure is high.

If the further training only offers an internal advantage, which can probably be assumed if it is a matter of refreshing the employee's existing knowledge, cost sharing is probably not permissible.

2 Duration of commitment

The key is that the employee's professional advantage hast o be in reasonable proportion to the duration of the commitment demanded by the employer. The employer's primary concern is to retain the employee for as long as possible.

There is no legally prescribed retention period; in this respect, employers must follow the principles developed by the Federal Labour Court. The dates in the chart are to be understood as the employee receives his or her remuneration during the period of further training and is not obliged to perform work.

Continuing education                               period Commitment period

up to one month                                         up to 6 months

up to two months                                       up to 1 year

3 to 6 months                                              up to 2 years

6 to 12 months                                            up to 3 years

more than 12 months                                up to 5 years    

These guideline values may differ in individual cases. Even a short qualification measure can be associated with very high costs and bring the employee a considerable professional advantage. The Federal Labour Court had to decide on a case in which the employee acquired a pilot's licence within a training period of 2 months. The costs for this training, which the employer had paid, were very high. Here the Federal Labour Court considered a retention period of 3 years to be appropriate.

3. Reason for repayment / termination /dismissal

The repayment agreement must clearly formulate when the employee can expect to repay the training costs. When concluding a corresponding agreement, the employee must know which type of termination of the employmentship will lead to a contribution to costs.

In this respect, a distinction must be made between termination by the employee himself and termination by the employer for reasons of conduct. These two forms of termination generally lead to cost sharing, since the employee either terminates the employment relationship himself/herself or his/her conduct leads to the employer giving notice of termination.

In the case of dismissal by the employer for operational reasons, cost sharing by the employee is usually unreasonable.

In the case of dismissal for personal reasons, e.g. due to the employee's illness, the legal situation has not yet been clarified. If one assumes that cost sharing by the employee should always apply if the reason for the termination lies in the sphere of the employee, something else should apply in the case of termination due to illness. Since in most cases the employee cannot influence an illness, cost sharing should be ruled out.

If the employee does not pass a final examination, the employer can not demand legitimately cost sharing. This should only apply in the rare case that the employee culpably fails to use his or her intellectual capacity in the event of the examination.

4 Transparency

The repayment agreement must inform the employee which costs and the amount are to be reimbursed. For example, the employer must precisely differentiate between the individual items such as seminar fees, travel, accommodation and subsistence costs and describe the basis on which the individual items are calculated, such as kilometre allowance for travel costs, daily rates for accommodation and subsistence costs, etc. The employer must also inform the employee about the amount of the reimbursement.

5. Staggering

The longer an employee remains with the enterprise, the less he or she is to contribute to the costs. This means that the repayment agreement must contain a so-called pro rata reduction of the repayment amount. In this respect, a graduation of any amounts to be repaid has become established in practice in the form that the repayment amount is reduced for each month of employment.

Tip for employers

Although there is no written form required, repayment agreements should always be concluded in writing. In case of dispute, the employer can prove which agreement was made. The repayment agreement should be drawn up strictly on the basis of the points mentioned above. This is crucial because an ineffective repayment agreement ceases to exist without substitution. The employer thus loses any claim to repayment. Employers are therefore always well advised to draft a repayment agreement with the support of a lawyer.

Tip for employees

Employees hope for better career prospects through qualification measures and want to be as flexible as possible and not be bound for an excessively long time to the employer who has paid for the qualification measure. Even if repayment agreements signed in many cases are invalid, the employee should have them legally examined. This is particularly the case if an agreement is intended to bind the employee to the company for a very long time, i.e. if it specifies long commitment periods.

Contact attorney Dorit Jäger and get expert advice.

Specialist attorney for labor law

Südwestkorso 1

12161 Berlin

www.ra-croset.de

Dorit Jäger is a lawyer and specialist in labor law. The law firm Croset- Fachanwälte für Arbeitsrecht consults and represents employers (small, medium-sized and large companies with up to 1,500 employees) and employees (employees of all income levels, managers, executives and directors) - throughout Germany.