Many employers have had the frustrating experience of investing significant time and money into training an employee only to have that employee quit before the employer realizes the benefit of the training costs expended. However, in some circumstances, and with careful preparation, an employer may be able to recoup those costs from the departing employee.
In the recent BC case of Wildcat Helicopters Inc. v. Ellis, the employer, Wildcat Helicopters, was in need of a helicopter pilot with a particular requirement (or “endorsement”) which would allow the pilot to fly a certain kind of helicopter. Ellis sought employment with Wildcat Helicopters but did not have the requisite endorsement. As a result, Wildcat Helicopters agreed to provide Ellis with the training necessary for him to obtain the endorsement (which would ultimately benefit Ellis in his career going forward). A condition of that promise was that Ellis enter into an agreement whereby he would repay the cost of the training ($30,000), or a prorated portion, in the event that he was fired for cause or left his employment within two years of signing the agreement. Ellis was provided the agreement in advance of the start of his employment and signed it without question. He completed the training necessary to obtain the endorsement approximately two weeks later.
Unfortunately, the relationship between Ellis and Wildcat Helicopters deteriorated within a short period of time and Ellis took the position that he had been constructively dismissed. Wildcat Helicopters then demanded repayment of 23/24ths of training costs, which Ellis refused to pay. Wildcat Helicopters then sued, and Ellis counterclaimed on the basis of constructive dismissal.
At trial, Ellis did not dispute that he understood and signed the agreement requiring him to repay the training costs. His entire defence was that he had been constructively dismissed, which Wildcat Helicopters argued was merely a strategy to avoid his repayment obligations. The court agreed, dismissed Ellis’ constructive dismissal claim, and allowed Wildcat Helicopter’s claim for the retraining costs.
Similar decisions have been reached in other provinces. In the Ontario case of Renaud v. Graham, the employment contract between a real estate brokerage and a real estate agent included a term that the employee would repay the employer for any training costs incurred by the employer in the one-year period prior to the employee’s termination, including course fees and travel costs. Repayment was required whether the employee was terminated by the brokerage, with or without cause, or whether the employee quit. When the employee quit (and ultimately joined a competitor brokerage), the employer demanded repayment of the training costs. After the employee refused, the employer sued. The trial judge concluded (and the appeal court agreed) that the employee had understood the terms of employment to which he agreed and that nothing in the contract was so harsh or unfair that would justify the Court refusing to enforce it. The Court also held that the requirement to repay training costs did not breach the requirements of the Ontario Employment Standards Act, 2000.
However, there are limitations to an employer’s ability to recoup such costs. Under the BC Employment Standards Act, employers are prohibited from requiring an employee to pay any of the employer’s business costs. Similar, but not identical, provisions exist in other provinces as well. The issue of whether training costs may be an employer’s “business costs” must be considered in light of the purpose of the costs and who benefits from them. The cost of training, which is mainly for the benefit of the employer and which may be unhelpful to an employee in future employment, is unlikely to be considered a cost which the employee can be required to compensate the employer for, regardless of whether there is a written agreement between the employer and employee.
There are also limits on the types of training costs that can be recouped and the types of employees from whom they can be recouped. For example, in 889946 Alberta Ltd. v. Carter, the owner of a Dairy Queen franchise attempted to claim costs incurred when the employer sent a store manager to a training course required by the franchisor. The Court held that the training provided to the employee was not related to any certification, licensing or regulatory requirements, and provided the employee with no qualifications which would be useful to her in future employment. The training was a requirement of the franchisor and thus purely a business cost of the franchisee. In addition, there was no provision by which the requirement to repay training costs decreased based on the length of employment. As a result, the Court found that the repayment requirement was unfair and unconscionable and thus unenforceable.
In conclusion, it is possible in some circumstances to recoup training costs from an employee. An enforceable written agreement with respect to repayment is a minimum requirement. As the cases discussed above reflect, a repayment clause is more likely to be enforceable if the training received by the employee provides them with a benefit beyond their employment with the employer. In addition, before repayment is actually sought, it is a good idea to obtain legal advice about whether there are any other considerations that need to be taken into account, such as any requirements under applicable employment standards legislation.