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Recoup training costs, but beware doing so with last paycheck

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in Compensation and Benefits,HR Management,Human Resources

It’s one of the recurring nightmares HR professionals have. You hire a promising applicant, send him to expensive training and then lose the value of that training when he takes those new skills to a new employer. You never had a chance to benefit from your training investment.

Employers can and should get applicants and employees to agree to pay back training costs if they depart before the company gets fair value.

But collecting the money can be tricky. You can’t, for example, withhold the money out of a final paycheck if that move takes the employee’s hourly wage below the minimum allowed by law.

Recent case: The city of Oakland hired Kenny Hassey as a police officer and sent him to the Oakland Police Academy. The city’s policy requires officers who complete the academy but leave before serving five years to reimburse the cost of the training.

All new officers sign an agreement stating, “Repayment shall be due and payable at the time of separation and the City shall deduct any amounts owed under this provision from the employee’s final paycheck. If this deduction does not fully reimburse the City for outstanding costs, the balance shall be due and owing.”

Hassey finished his training but was told he wasn’t performing well and should resign and sign a repayment plan for the training costs. He did, and the city withheld his entire final paycheck. Then it began sending him collection letters. It finally sued for the balance.

That’s when Hassey countersued for wage-and-hour violations.

The court said that the payment plan was legal, but withholding from Hassey’s last check was not. Because the deductions meant he was paid less than minimum wage for his last pay period, the action was illegal. (City of Oakland v. Hassey, No. A116360, Court of Appeal of California, 1st Appellate Division, 2008)

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