Tired of Training Your Competitors’ Employees? – burden and expense of providing technical training.

More and more employers are picking up the burden and expense of providing technical training for their employees. While some of this training is done on site, much of it is done in structured fee-for-service settings. And even the on-site training has both direct and indirect (training facilities, trainers, time-off the job, etc.) costs.

A decision by the Michigan Court of Appeals validated a “tuition contract” signed by an employee as a condition of being hired. This contract defined a training period and a value of the training to be provided, week to week, and over the whole training period. It appears most of the training was “on the job training,” but there were six formal training sessions, as well. The employee would have to repay the employer for the training value received unless he worked for a specified period of time after the training was completed. Each week of continued employment after the training period would constitute payment for one week of training. If employment terminated “for any reason,” any unpaid amount was to be paid in full.

The Court set forth guidelines that, if satisfied, make agreements like this enforceable in the State of Michigan:

  • training value/cost exceeded the “repayment” obligation.
  • employee was fairly paid for the services he rendered as an employee, receiving increases as his training progressed.
  • the training received was specialized and directly job related — without it he could not have performed his job.
  • employee’s pay was not docked.
  • the obligation to repay did not arise until after the employment terminated and then only if that occurred within a defined time period.
  • the arrangement was in a writing, signed by the employee, which was found to be “contractual.”

While it appears that the best time to do this (from a legal perspective) would be at the time of hire (or perhaps, equally, at the time of promotion to the job requiring the training), this idea should also work where job skills are being upgraded to maintain the current job (for example, a new CAD system).

Of course, a similar approach may be taken with a typical tuition reimbursement plan where an employee may be allowed to exceed the allowance by committing to serve his employer for a stated period of time or, upon leaving earlier, facing a repayment obligation with regard to the excess.

Bottom line, there is no reason for an employer to subsidize its competitors by financing the training of the competitor’s employees. Stated in a positive light, there are many ways to encourage longevity in the employment relationship.  Take advantage of these opportunities.