What Is a Training Agreement and How Do You Use It?

As an employer, it is important to invest in employee learning and development to help your team grow. Training and development plans for employees can help them to close skill gaps, gain valuable experience and become better-qualified staff members. If you decide to offer employee training, then you need to make sure you have an effective training agreement in place.

In this post, we will look at what you should include in your training agreement and how it should be used. We will also discuss the laws relating to training contracts and what to avoid when you draft your agreement.

What is a Training Agreement?

A training agreement, or an employee repayment agreement is a legally enforceable contract that sets out the terms and conditions of any training that you provide your employees. It establishes the cost of undertaking training, and who is responsible for paying.

If the employer is covering training expenses, then a training agreement will define a repayment schedule to be used in the event an employee leaves the company soon after completing their training. Repayments are usually on a sliding scale, so the longer an employee remains at a company after training, the less they are eligible to repay. A training contract will also define whether training deductions can be made from a departing employee’s final salary.

What is the Purpose of a Training Agreement?

Ultimately, the success of your company depends on the people that work there. The more training and development they receive, the better they will be at their jobs. Aside from teaching your employees new skills, employee training programs, workplace mentorship, peer mentorship, and coaching in the workplace can help make your company more organized, productive, and efficient. Creating a culture of learning can also result in increased employee engagement and satisfaction, and higher levels of employee retention.

However, there is always a level of risk involved in training and relocating employees. For one thing, they aren’t cheap. What happens if you pay for a course then the newly-trained employee decides to leave the company? Or, even worse, if they decide to take their newly-acquired skills to a competitor?

In this scenario not only would you lose the training investment, but you would also have to pay to train up a replacement. This could have a significant impact on your company in the long term, especially if you are a small business.

For employers, new talent is an investment.  Although there are possible negative consequences, a training reimbursement agreement can provide this protection for employers looking to shield themselves from resignation-related expenses.

A well-drafted training agreement protects you and your investment as an employer. It prevents you from being left out of pocket after paying for expensive courses and professional qualifications. It also provides you with an assurance that the money you spend on an employee’s training and development will be reinvested in the company.

How to Use a Training Agreement

There are a few things to consider when you draft your training agreement template:

• Draft a separate agreement for all training and development opportunities. Don’t rely on the training clause in your standard employment contract.
• Ensure all terms and conditions are clearly defined in writing.
• Make sure employees sign the written agreement before starting training.
• Establish the true cost of the investment in the document (not an estimate)
• Outline in which event repayments will be deemed necessary (resignation, gross misconduct, etc.)
• Define a sliding scale for repayments. The amount an employee will need to pay back should reduce over time. In other words, the longer they stay with you after completing training, the lower the amount they will have to pay back.
• If the cost of training is relatively low, you might consider deducting it from an employee’s salary. If this is the case then you need to stipulate this in the agreement.

Training Reimbursement Agreement: Legal Factors

While drafting an employee repayment agreement, there are a few legal factors that come into play.  Here are some points that you need to consider if you are planning to put a training reimbursement plan in place.

 Make Sure that Training is Voluntary

Employees need to have the right to choose whether or not they undergo training. If the trainings are compulsory for employees, employers will most likely be unable to legally justify the training agreement, nor the recompensation.

Tell Employees About Repayment from the Start

If possible, employees should be aware of the training agreement before even signing their offer letter.  Everything should be made crystal clear from the very beginning.  Training agreement contracts for existing employees should be presented before they start the course or training program.  It should be made very clear that the document is a contractual agreement.  Encourage employees to thoroughly review the document before signing.

Specify Training Agreement Details

The agreement should specify details such as:

• The quantity of time that employees must stay with the company after the training has taken place.
• The repayment amount that the employee is responsible for if he/she/they choose to leave

Typically, employers choose to include a repayment scale, based on the amount of time that employees stay in the company. Be clear about the consequences of leaving within a defined period after training.

Take into Consideration Federal and State Laws

Before putting a training agreement in place, employers need to consider federal and state-level legal compliance.  Here are some of the laws that need to be kept in mind:

• Overtime laws
• Minimum wage laws
• Collective bargaining agreements
• Laws prohibiting “non-compete” agreements

Biden's Executive Order to Ban Non-Compete Agreements

On July 9, 2021, President Biden issued his Executive Order on Promoting Competition in the American Economy.  Under this executive order, the Federal Trade Commission (FTC) is encouraged to block or ban non-competition agreements, or “non-competes”.  This measure prevents employers from restricting previous employees from working for a competitor.

Despite Biden’s executive order, non-compete agreements have not yet been incorporated into federal law. Generally speaking, the enforceability of non-competes is more dependent on state laws. Even before Biden’s executive order, several states already banned or limited non-competition agreements.

States that Ban Non-Compete Agreements

In the following states, employers are largely unable to enforce non-compete agreements:

• California
• North Dakota
• The District of Columbia
• Oklahoma

States that Limit Non-Compete Agreements

Additionally, the following states have banned non-compete agreements for low-income workers:

• Maine
• Maryland
• New Hampshire
• Washington
• Rhode Island

If you live in one of these states, you need to make sure you avoid any clauses that could be construed as a non-compete. Make sure you write a training agreement that protects your investment, not one designed to “trap” employees. Be careful how you word your contract and make sure the terms are reasonable.

Make sure your repayment schedule is fair and reflects the actual cost of training. Make it clear that employees have a responsibility to repay training costs if they leave, but that they are still free to leave. And once you have done this, create a training agreement template so that terms are clear with every training opportunity. This will protect your training investments, but most importantly, it will protect your business for years to come.