Companies are using a specific legal stipulation to force their former employees to repay training costs, sometimes to the tune of tens of thousands of dollars.
Training reimbursement agreements require employees to pay back training costs if they leave within a certain period after their hiring. The Skin Cancer Institute in Delano, California, for example, filed a lawsuit against a former employee in August claiming she owed $38,000 in training costs and $100,000 for loss of business.
“I thought there was nothing that could happen that would make me want to leave the contract early,” the employee, Drew Lakey, told The New York Times.
Nearly 10% of workers reported being covered by training reimbursement agreements in 2020, according to the Cornell Survey Research Institute. Further, a survey of 1,700 nurses found that more than a third were subjected to such agreements.
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“They’re just becoming ubiquitous,” Ashley Tremain, an employment lawyer in Texas, said, “as people are trying to find creative ways to move around noncompete restrictions.”
Tremain noticed that the use of the agreements began rising five or six years ago. Now workers contact her about them several times a month, most commonly owing $20,000.
“It’s really an enormous amount of power that the employer holds in that situation,” Tremain told the New York Times.
Employers, however, believe the costs are justified.
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“When the employee is going through the training voluntarily, primarily for their own benefit, in those situations, as a rule, the repayment obligation would be enforceable, and would be legal,” Dan Pyne, a lawyer who has written and represented companies enforcing agreements, said. “When the training is required by the employer, that is the employer’s cost of doing business.”
Employees who move from job to job can have a detrimental impact on business, according to the owner of a Washington state skincare clinic. She sued a former employee for $2,244, claiming she lost time and money on training the former employee.
Meanwhile, the Biden administration has worked to limit stipulations like training reimbursement agreements. In January, the Federal Trade Commission proposed a rule that could ban many noncompete and reimbursement agreements.
Madison Burch, a 26-year-old who quit her health care job in November without passing a board certification exam, was sued for $30,000 by her former employer.
“I told myself mentally that I could never work for anybody that made me hate what I did,” she told The New York Times.
Her lawsuit is still ongoing.
The Skin and Cancer Institute did not return a request for comment.
