At the same time, California law favors employee mobility, and disfavors employers' passing along the costs of doing business to employees.
So, some employees try to escape from their promises to repay training costs by attempting to claim that these arrangements violate the law. Under most circumstances, though, these are legal agreements, and employers are entitled to the benefit of their bargain.
The Court of Appeal today issued a decision involving a company who sued its former employee and won summary judgment on a claim for breach of contract. As explained by the Court:
Floyd Case voluntarily enrolled in a three-year, employer-sponsored educational program. He agreed in writing that if he quit his job within 30 months of completing the program, he would reimburse his employer, USS-POSCO Industries (UPI), a prorated portion of program costs. Two months after completing the program, Case went to work for another employer. When he refused to reimburse UPI, the company sued for breach of contract and unjust enrichment. Case cross-complained, asserting the reimbursement agreement was unenforceable and UPI had violated the Labor Code and other statutory provisions in seeking reimbursement.So, Case received an estimated $46,000 in training while he was paid to work. He agreed that if he left within 30 months of completing the training, he would pay back $30,000, less $1,000 for each month he stayed.
But Case left just two months after completing the training. So, UPI, the employer, sued him for $28,000. Case cross-claimed against UPI, claiming that the agreement to repay the money was illegal for every reason under the Labor Code, and that it was a de facto non-compete agreement, that it violated the National Labor Relations Act, and that caused cancer. OK, not the last one.
The trial court granted summary judgment and the court of appeal affirmed. The court rejected all of the arguments essentially for the same reasons. First, there was a written agreement. Second, this was not an employer-mandated training program. Third, participation was voluntary, in that Case could have taken the test for the position he sought without going through the training. Fourth, he did not have to lay out any money of his own, rendering most of his Labor Code claims inapposite. Fifth, the training was transferable to other employers and other work.
The Court, however, noted that if an employer developed its own program and mandated it, it might not be something for which the employer could obtain reimbursement. That was the case in In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498, when Los Angeles tried to recoup certain costs of special training that it required of its police officers, unique to its own operations.
We posted about another case on this subject a couple of years ago here. In that case, Hassey v. City of Oakland, it was legal for Oakland to recoup its training costs from police officers who left employment before the agreed-upon date. (It was illegal to deduct the costs from the final paycheck, though).
Another issue this court addressed in this case was the revised attorney's fees statute in the Labor Code, section 218.5. That section used to be purely "two-way" and award fees to the prevailing party. The Legislature has now made it so that employers can recover fees only if the plaintiff brings the case in bad faith. The court held that this statute is retroactive because it is procedural, and therefore applies to all pending cases. That's bad news for employers litigating a variety of wage-hour lawsuits that were pending before the amendments to section 218.5.
This case is USS-POSCO Industries, Inc. v. Case, and the opinion is here.
