HR/Legal issue: Employee Tuition Reimbursement

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HR/Legal issue: Employee Tuition Reimbursement

Postby Jopaz on Wed Jul 10, 2013 9:37 am

Many companies that provide reimbursement for employee college tuition or job-related training classes also have a policy that the employee must pay back the company if he leaves within a period following the completion of the class, typically 6 to 24 months. Some questions for anyone that has dealt with this:

- Is the policy legally enforceable?
- Beyond sending a letter asking for re-payment, has anyone seen a situation where the company went to court to collect the money? Who won?
- If the policy has been "sporadically" enforced (i.e. not try to collect from everyone who left), does that weaken the company's position?
- My understanding is that this cannot legally be witheld from the employee's final paycheck or unused vacation/sick time payments, is this correct?
- Since the employee does not actually have the money (he spent it on the tuition), is it reasonable to set up a payment plan? Then what happens if the employee does not meet the payments?
- In general, what recourse, if any, does the company have after the employee leaves?

I guess these same questions can apply to a sign-on bonus if the employee leaves before the specified period.

Thanks for any insight......
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby ulf on Wed Jul 10, 2013 9:42 am

When I was reimbursed, i signed an agreement that if I left within three years I would be liable to repayment. If you signed a contract, I'm not sure if you're getting out of it.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby newarenanow on Wed Jul 10, 2013 9:46 am

I'm not sure, but I'm guessing you or someon you know want to leave before the agreed upon time period?
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby skullman80 on Wed Jul 10, 2013 9:55 am

If you signed something then I think you are gonna have to pay it back. I wouldn't doubt them coming after you for the money either.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Pitt87 on Wed Jul 10, 2013 10:06 am

Anything you signed is enforceable. You should never ask someone to pay for something on your behalf that you don't intend to repay in full.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby 60sixx on Wed Jul 10, 2013 11:17 am

I'd be interested in some insight in this too, as I've often wondered about it. Word is around my company is that they don't come after you, but it would be like me to "set a precedent."
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby newarenanow on Wed Jul 10, 2013 11:27 am

Yeah, just in my mind, they are making an investment in their employee, and they want to see some return in that investment. That is why they typically do this. They don't want to pay for a chunk of your education and then see you walk out the door right after.

I have no idea with the legality behind this, but I see it similar to employment clauses and other noncompete clauses as well.

Also, if you signed a paper agreeing to it, it is up to the company to come after you or not, but if they do, I don't see a way around it IMO.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby pittsoccer33 on Wed Jul 10, 2013 11:34 am

newarenanow wrote:
I have no idea with the legality behind this, but I see it similar to employment clauses and other noncompete clauses as well.


Where I interned in college saw this all the time. Wealth management team jumps ship from one firm to another with all their clients (and several hundred percent of last year's gross) and in the process is sued for millions (along with their new branch manager), which the new firm pays for.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Kraftster on Wed Jul 10, 2013 1:14 pm

I don't see any reason it would be illegal.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby ffemtreed on Wed Jul 10, 2013 1:30 pm

Think hostile work environment...........
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby tifosi77 on Wed Jul 10, 2013 2:10 pm

All of the following answers presume that 'the employee' signed something in the raft of paperwork required to obtain the reimbursement expressly stating the conditions of repayment. It also presumes that the education or training was not a requirement of the job, but was merely personal enrichment falling within the guidelines of the company's tuition reimbursement policy.

Jopaz wrote:- Is the policy legally enforceable?

On what grounds do you question that it might not be?

Jopaz wrote:- If the policy has been "sporadically" enforced (i.e. not try to collect from everyone who left), does that weaken the company's position?

Again.... why is this being questioned? Unless there is a questionable pattern to the sporadic enforcement (say, they only seek repayment from black females), there's no reason why going after x but not going after y makes y less on the hook for the agreement they signed.

Jopaz wrote:- My understanding is that this cannot legally be witheld from the employee's final paycheck or unused vacation/sick time payments, is this correct?

In CA, employment law states that employers cannot set off debts between the company and a departing employee by withholding pay. But that's not universally the case. If PA does not have this restriction, I think they can withhold every dollar over minimum wage represented in the vacation time payout. For example, say you, er the employee has two full weeks of vacation time to cash out. At 40 hrs a week, that's $580. But if you're salaried at $40k/yr, two weeks (before tax) is just over $1,500. So that's about $1,000 that's presumably up for grabs upon separation.

Jopaz wrote:- Since the employee does not actually have the money (he spent it on the tuition), is it reasonable to set up a payment plan? Then what happens if the employee does not meet the payments?

Sure, it's reasonable. But I it's not required. Again, you'll the employee will have to review their reimbursement docs for the conditions of repayment.

Jopaz wrote:- In general, what recourse, if any, does the company have after the employee leaves?

Collection agency. Lawsuit.... and few things in the world makes you more attractive to potential employers like having your former employer sue you. And by more, I mean less.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Mango Salsa on Wed Jul 10, 2013 3:20 pm

My girlfriend works in a nursing facility and they have a policy like this. After you've worked there one year they'll send you to nursing school but you have to pass your classes and I think you owe them two years service once you graduate or you have to pay back the tuition. She says they dont enforce it, though.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Shyster on Wed Jul 10, 2013 4:44 pm

tifosi77 wrote:
Jopaz wrote:- My understanding is that this cannot legally be witheld from the employee's final paycheck or unused vacation/sick time payments, is this correct?

In CA, employment law states that employers cannot set off debts between the company and a departing employee by withholding pay. But that's not universally the case. If PA does not have this restriction, I think they can withhold every dollar over minimum wage represented in the vacation time payout. For example, say you, er the employee has two full weeks of vacation time to cash out. At 40 hrs a week, that's $580. But if you're salaried at $40k/yr, two weeks (before tax) is just over $1,500. So that's about $1,000 that's presumably up for grabs upon separation.

In Pennsylvania, it may depend on what the paperwork says. The regulations for the Wage Payment and Collection Law authorize a number of deductions, including "Deductions for purchases by the employe for his convenience of goods, wares, merchandise, services, facilities, rent or similar items from third parties not owned, affiliated or controlled directly or indirectly by the employer if the employe authorizes such deductions in writing." The purchase by the employee of college education could be something deductible from wage payments under this provision, if the employee has agreed to it in writing.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Kraftster on Wed Jul 10, 2013 4:47 pm

FLGPI, I love WPCL cases.

Edit: ^ *good
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby tifosi77 on Wed Jul 10, 2013 5:10 pm

Mango Salsa wrote:My girlfriend works in a nursing facility and they have a policy like this. After you've worked there one year they'll send you to nursing school but you have to pass your classes and I think you owe them two years service once you graduate or you have to pay back the tuition. She says they dont enforce it, though.

Going to nursing school after a year might be considered a requirement for the job, in which case the repayment policy couldn't be enforced. That it's in place at all is likely just to act as a deterrent to people collecting a free education and bouncing.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby King Sid the Great 87 on Wed Jul 10, 2013 6:34 pm

I recently left my job for a competitor and had $3200 I owed for my last class as my new company made a condition of employment to start on a date before I was clear. Tuition reimbursement is outsourced to a 3rd party so I suspected I might skate. I got my new company to add the money to a sign-on bonus just in case. Walked out the last day no questions asked. Got my last paycheck with all of my vacation paid out (just over $8K, so they could have gotten it there easily). I suppose they could catch me on pension payouts in 30 years, but my guess is I have been wiped from the system. If they didn't care enough to check on my way out the door, they won't be doubling back.

Tif, you will be happy to know that Lockheed's inefficiencies extend beyond F-35.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby Jopaz on Thu Jul 11, 2013 9:05 am

Thanks everyone for your input. We are trying to hire someone who is caught in this situation and he is hesitant to leave his current job without knowing for sure. He potentially could owe over $10K.

It seems like if the employee signed a formal agreement or promissory note, then it is clear that they will owe the money. However, if the re-payment language is just another line in the HR manual, then it probably is there as a deterrent but the company is not likely to chase down someone after the person leaves. In the latter case it could also depend on the circumstances around the departure....leading to the sporadic enforcement that I have heard about.

Also, a case can be made that the company received some benefit from the additional training/knowledge while the employee was still there. And a large company might let this slide but even $10K is a big amount for a smaller company.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby mac5155 on Thu Jul 11, 2013 9:36 am

FWIW my employer's policy is everything must be paid back that was given within 1 year prior to the date of termination. It's not everything over the course of employment, just the last 1 year.
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Re: HR/Legal issue: Employee Tuition Reimbursement

Postby tifosi77 on Thu Jul 11, 2013 10:56 am

Jopaz wrote:Also, a case can be made that the company received some benefit from the additional training/knowledge while the employee was still there. And a large company might let this slide but even $10K is a big amount for a smaller company.

That's not really an argument for the employee owing less money.

The guy needs to review his reimbursement paperwork. Or negotiate with you to pay off the outstanding amount as part of his new compensation package. :wink:
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