Some employers offer paid tuition, training, or education reimbursement to its employees. This is a great incentive for the employee who wants to further their education or training and is beneficial to the employer. But unless done properly, you may be giving your “former” employees marketable skills to work for your competitors.
If an employee takes you up on your company’s training/education program, you need to protect your company. You can require that the employee pay all or part of the training fee, tuition, books, etc. back within a certain amount of time of completing the training, class, or obtaining a degree if they voluntarily terminate their employment within a certain period. The terms of the repayment should be clear. You should also send them an invoice for the amount owed, upon voluntary termination of their employment, if there remains a deficiency.
You can protect your company by having the employee sign a Cognovit (also known as a confession of judgment or warrant of attorney) or Education/Training Agreement and a separate Cognovit Note. These documents allow you to obtain a Judgment, by using an attorney, in circuit court without having to serve your former employee (without the Cognovit, personal service or sending via certified or registered mail with a signed return receipt is required). This saves time and money by not having to have the employee served and the employee cannot file defenses prior to the court issuing a judgment. Cognovits are generally given where the party, having no defense to an action for debt, authorizes an attorney to confess judgment in order to save expense.
The Michigan Court of Appeals in USA Jet Airlines v. Schick found in favor of the employer after the employee signed an employment agreement stating that the employer would pay for the employee’s training, but the employee would have to reimburse the employer if he terminated his employment less than twelve months after the training. The Court held that the employee was bound by the terms of the cognovit note reasoning that the cognovit note was separate and distinct from the employment agreement because the “Cognovit Note” was under the employment agreement section with a separate heading that was in large capital letters, underlined, and in bold on the page titled “Employment Agreement and Cognovit Note”.
The Education or Training Reimbursement Agreement, which the employer and employee sign, must state that the employee waives service of process and authorizes a confession of judgment against himself/herself in favor of the employer in the amount of the unpaid tuition/training if the employee terminates his/her employment before the period [you must specify the period]. You should also have the employee sign a Cognovit Note (separate and distinct document) with specific terms of the confession of judgment, including the reimbursement of attorney fees and costs if you have to pursue the Cognovit Note in court.
If your former employee will not pay, your attorney can file the Cognovit and Cognovit Note requesting a judgment. Just like all other judgments and default judgments, the employee will have 21 days from the date of the judgment against him/her to appeal or request to set the judgment aside. Make sure you have evidence that he/she, not the employer, voluntarily terminated his/her employment (i.e. a signed letter of resignation) to avoid having to litigate the issue.
If you have any questions regarding cognovits for your business, please contact Andrea Pike at 248-645-9680 or by e-mail: apike@berrymoorman.com.
