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Can I Enforce a Training Agreement?

Published April 06, 2017 (last updated May 31, 2022) - NZ Operations Manager

The benefits which stem from training and upskilling your employees are obvious and most employers would engage in some form of training for their workforce. However, it can be awkward if an employee leaves the role at the conclusion of training, especially if you have paid for their training.

A recent case in the Employment Court serves as a warning to employers that recovering costs related to training, as well as recruitment and equipment, can be unlawful. Some employers try and ensure their return on investment when training employees by bonding employees to the company for a certain period of time after their training. Going a step further in this scenario, they may try to make an employee liable to pay an amount if they do not stay for a certain time period. This can be unlawful. If a bonding arrangement does not benefit the employee, it may be inconsistent with the WPA.

In the case of Labour Inspector v Tech 5 Recruitment Limited, the judgement outlined that in some trades it is accepted that reimbursements from employees to employers occurs for things like tools which could be covered by an advanced payment from the employer. However, this becomes unlawful if the employer attempts to profit from this type of transaction.

This case also provides that a bond where the employer paid for the employee to complete a recognised course of training, leading to a qualification for the employee and to them being better qualified for the employer, would be a legitimate bond. Importantly, this is provided the duration of the bond is reasonable, and the other features are in proportion to the commitment made by the employee.

A training agreement should, at the end of the day, result in a mutual benefit. A benefit for an employee can be:

  • when the training agreement relates to a specific qualification that could be used in other employment
  • if the training is provided by a recognised training body
  • where the length of time the employee is bound to the employer is reasonable, and the other conditions of the agreement are reasonable

It is important that, as an employer, you are clear in what qualification your employee is gaining and that your agreement is a clear benefit to both parties. Breaches of the Wages Protection Act 1983 are a real possibility in training agreements, so if you are drafting a bonding agreement it must be fair and reasonable.

For advice call Employsure on 0800 568 012.

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