Employee Training: Payment Obligations and Strategies for Employers
Many employees receive training related to their jobs, or to positions to which they might be promoted. Employers sometimes require employees to undergo training and provide the training in-house. In other situations, employers require employees to receive training from outside vendors. Employees sometimes pursue training voluntarily and upon their own initiative as well. Employers sometimes mistakenly believe that they are not obligated to pay employees for time spent in training. In reality, employers’ obligations depend on the circumstances of the training.
When employers provide mandatory training to their employees, time spent by non-exempt employees in training is considered work time and is compensable. Time dedicated to training by exempt employees is also considered work time, but is not compensable separately from the employee’s salary.
When an employer requires an employee to pursue training from an outside vendor, not only must the employer pay non-exempt employees for the time they spend training, they must also pay the cost of the training. Employers sometimes attempt to recoup the cost of such training from employees through various means, but if an employer requires an employee to undergo training, it cannot force the employee to bear any portion of the cost, even if the employee resigns shortly after completing the training.
If an employee pursues training in a truly voluntary fashion, the time spent in training does not count as work time and is not compensable. Employers sometimes agree to pay some or all of the cost of training that an employee elects to pursue on a purely voluntary basis, however. In those situations, the employer may want to protect itself against the possibility that it would pay for the non-mandatory training only to see the employee resign a short time later, before the employer is able to recoup the value of its investment. Employers desiring to protect themselves against that outcome can do so through a variety of means, including these:
- Reimburse the employee for the cost of the training only after some period of time has elapsed – Employers can fully eliminate their risk by not paying the cost of voluntary training up front and, instead, reimbursing the employee in a lump sum only after she has completed some minimum term of employment after finishing the training. (The amount paid to the employee would probably be subject to payroll taxes if the training is voluntary.)
- Increase the employee’s compensation after the completion of training – Rather than paying for the cost of training on an employee’s behalf, employers can increase the employee’s compensation after she has completed training, essentially reimbursing the employee in installments each pay period. The employer can set the employee’s compensation in a manner that requires the employee to remain with the company for a particular period of time in order to recover the full cost of the training.
- Pay the cost of the training in exchange for the employee’s agreement to reimburse if she resigns within a defined period of time – Employers can also offer to pay the cost of training up front in exchange for the employee’s promise to repay the company some or all of the cost if she resigns before a specified date. Many employers pro rate the reimbursement obligation based on the timing of the resignation, such that an employee who resigns soon after completing training is obligated to reimburse a large portion of the cost, while an employee who resigns much later is obligated to reimburse a much smaller amount. This approach leaves the employer subject to the risk that the employee will be unwilling or unable to reimburse it as agreed, however.
While these strategies and others can protect against the loss of a training investment, they cannot deduct the cost of training from an employee’s final wages without obtaining the employee’s written consent at the time of termination (not at an earlier date).
Uninformed employers often expose themselves to potential liability by failing to pay employees for time spent in mandatory training or by attempting to shift the cost of such training to employees.