Recovering Training Costs from Employees

LA PD AcademyIn some cases the cost of training employees can be very high. Specialized schools and lengthy professional training programs may be necessary to do the job and may be required by employers. In such situations employers can be leery about bearing the cost of training only to see the employee use the training to obtain employment elsewhere. As a result, some employers have utilized agreements with employees requiring the employee to reimburse the cost of the training if the employee leaves to take another job. A recent case from the California Court of Appeal highlights the need for careful consideration before using such agreements and even more careful drafting of the agreement in those cases where such an agreement is permissible. The case involved the City of Los Angeles and its requirement that all newly hired police officers attend and graduate from the Los Angeles Police Academy. The city felt that too many officers who graduated from the academy were leaving within a few years to join other law enforcement agencies. To fix this problem the city enacted a requirement that officers going through the Academy reimburse the city a prorated portion of the cost of training when an officer resigns within five years following graduation and goes to work for another law enforcement agency. The officers were required to sign an agreement acknowledging the obligation to reimburse the training costs. The city was successful in suing a number of officers for the reimbursement, but the officers appealed and the Court of Appeal ruled that the reimbursement agreement was void. The court relied upon Labor Code sections 2802 and 2804 to invalidate the city’s system for seeking reimbursement. Section 2802 states: An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful. Although section 2802 does not specifically discuss training costs, the court agreed with the Labor Commissioner’s interpretation of training costs under the statute. Under that interpretation, an employer does not have an obligation to pay for the training that leads to an employee’s professional license or the cost of the license. If the law requires a certain license to perform a job, the cost is the employee’s. If the law does not require the license but the employer does, the cost is the employer’s. Although the city’s Academy included training that was required by law for all peace officers, it also included city-specific training. Under the court’s interpretation of section 2802, the city could have recovered that portion of the training mandated for peace officer licensure, but not the portion relating to city-specific training. Unfortunately, the city did not take care in drafting the reimbursement agreement to separate the two. As a result, the entire agreement was ruled to be void and unenforceable. Employers seeking the ability to recover training costs and/or to build incentives for highly-trained employees stay with the employer should carefully consider the impact of section 2802. They should also be very careful in structuring the training and the agreements that go along with it. The court’s opinion can be found at http://www.courts.ca.gov/opinions/documents/E058460.PDF