Germany: Can An Employer Recoup Training Costs When An Employee Leaves Voluntarily? Guidance From Germany

A German court has ruled that a clause in an employment contract requiring an employee to repay training costs if his employment was terminated 'at the employee's request' was too widely drafted to be valid.

An employee getting training at the employer's expense and then quitting can be an expensive business for the employer. Under certain circumstances, however, the employer can demand the training costs back, provided the repayment clause is effective. Despite numerous court decisions on the limits on contractual repayment clauses, problems still arise in practice. In a recent decision, the Hamm Higher Labour Court (judgement of 11 October 2019 - 1 Sa 503/19) has again rejected a repayment claim because of an invalid repayment clause. Among other things, the repayment claim was linked to termination 'at the employee's request'.

Background

In 2016, the plaintiff employer concluded a further training agreement with the defendant employee in which the plaintiff undertook to assume the training costs on continued payment of remuneration.

The training contract stipulated that the plaintiff should be able to demand repayment of these costs if, among other things, the employment relationship was terminated 'at the employee's request' within 24 months after the end of the training. The defendant employee duly terminated the employment relationship with effect from the month in which he successfully completed the training.

The employer claimed back a total of EUR 13,628.15 in costs incurred in the course of further training the defendant. The defendant refused to pay and the plaintiff first took legal action before the Herne Labour Court.

At both first and second instances, the plaintiff's claim for repayment was denied and the action was dismissed.

The decision

The Hamm Higher Regional Labor Court (and the lower court) rejected the claim for repayment as the repayment clause in the further education agreement unduly disadvantaged the employee and was therefore invalid.

Contrary to the plaintiff's assertion, it was not appropriate to interpret wording relating to dismissal 'at the employee's request' as meaning that it only covered a dismissal 'of one's own free will' and without any influence by the plaintiff employer. Rather, the wording had to be understood to include, without distinction, any termination of the employment relationship arising from notice of termination given by the employee. As a consequence, under this agreement repayment of training costs could be demanded even if the employee gave notice of termination on his own initiative because of a breach of duty by the employer. The Federal Labour Court had already decided in 2018 that this type of wording constituted an unreasonable disadvantage (judgement dated 11 December 2018 - 9 AZR 383/18). This type of clause deprives the employee of the opportunity to escape the repayment obligation by remaining loyal to the employer.

Finally, the Hamm Higher Regional Labor Court also declared the clause to be invalid in its entirety. Severance of the problematic content that maintains the validity of the clause (i.e. repayment only applies where the employee chooses to resign for reasons that are within the employee's area of responsibility), is fundamentally out of the question in general terms and conditions of business.

Practical note

In order to ensure that repayment of training costs can actually be demanded in the event of termination, it is important to keep current case law in mind. The risk of an ineffective clause is high given the current employee-friendly case law, as is the cost risk if the repayment clause is not valid and the investment in the employee's training is lost when the employee leaves. In any case, this decision should provide an opportunity to review whether repayment clauses used link the repayment obligation to dismissals that are the employee's responsibility. Unclear and too broad formulations can 'overturn' the entire clause, as the Hamm Higher Regional Labor Court has pointed out again.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.