Employment Law on Training Bond
Employment Law on Training Bond

Employment Law on Training Bond

Overview

It is quite common that in some industries that the employer will provide for their employee with “work-related training” so that the latter would be qualified to perform the duties or functions that they are hired for.

In consideration of the contribution to their training costs, the employees are required to give an undertaking that, if they leave the employment within, for example, 3 years, they would repay their training costs or a portion thereof.

This is often referred to as an “employment bond” or “training bond”, and is commonly seen in airlines industries which provide such work related trainings to their pilots.

Such agreement may be contained in the employment agreement, therefore, employees must be aware of its legal implications before signing it.

At times, it could also be a stand-alone agreement in respect of education and training costs and expenses incurred by the employer in favour of an employee.

The Law

1.Terms & Conditions

Like any other contracts or employments, training bonds must exist on clear and unambiguous terms.

The employer needs to exercise caution when drafting such an agreement. Such terms that the employee is liable to repay all or a proportion of the training costs if the employment terminated must be expressly stated.

Other considerations include

    • whether there will be a grant for leave of absence when the employee is attending the training course,
    • be it paid or unpaid, and
    • what are the trigger events that would give rise to the obligation to repay certain expenses incurred on the employee’s behalf by the employer.

If intended, it is also essential that the terms of the repayment provision state that repayment can be by way of deduction from the employee’s salary or wages.

2.Compensation

If properly drafted, such agreement gives the employer an enforceable monetary compensation or claim for liquidated ascertained damages, if it pays for training and the employee then leaves the employment before the employer has had any (or any adequate) advantage from the training.

3.Judicial Consideration

It has always been the judicial consideration that whenever the employer is taking steps to enforce the repayment clause in the employments bond or training bond, it must not claim for excessively high and unconscionable penalty in order to deter or punish the employees for prematurely leaving the employment.

Our view is that such exorbitant claims can never apply where the contract does not impose an obligation to perform the act, but simply provides that, if one party does not perform an act, he will pay the other party a specified sum.

 

Conclusion:-

In summary, a signed Training Bond by the employer and the employee connotes a free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is signed voluntarily without fraud, misrepresentation, coercion, duress or undue influence, thus enforceable in court of law.

 
About the Author: 

This article was written by Chia Swee Yik Partner of this Firm (+6012 828 2198, chia@chialee.com.my), who endeavors to provide practical advice on employment law.

Feel free to contact him if you have any queries.

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