Most employers realise that to compete, especially in today's turbulent economy, they must continue to provide staff with extensive training and opportunities for continuing professional development.
Failure to do so will only lead to a steady and inevitable decline in corporate performance relative to others in the same sector. That may become evident in different ways - falling productivity, lower sales and lost market share, or through more customer complaints, unfavourable comparisons or incidents leading to litigation.
Training is therefore vital to get staff up to speed with new roles and changing responsibilities. But whether it involves in-house workshops, externally arranged seminars or on-the-job coaching, there are costs involved and these can be significant.
When all goes according to plan, an employer will rightly regard the outlay on training as an important investment for the firm's long-term growth, with the expectation of recognisable and measurable benefits. That is where they get their payback.
However, if an employee leaves a company shortly after attending an expensive training course, the prospect of any "return on investment" immediately vanishes. In those circumstances, the employer may understandably want to recover the associated expenses, in whole or part. If the original contract of employment has anticipated this possibility and spelt out relevant terms, then such costs will be repayable by the employee accordingly. In some instances, there may even be provision in the contract for other related damages or compensation.
But without express contractual obligations, it can be difficult for employers to recoup training costs from departing staff. This is particularly true if the training is in-house, with no specific costs allocated and made known in advance.
In such cases, the employer's only chance of recovering outlay might be to establish that money was paid out to his detriment and that there was an implied agreement the employee would continue to work for a reasonable period after the training. The burden of proof would be on the employer to show that the understanding at the time was mutual.
Even when the employment contract contains terms relating to training expenses, there can be problems. For instance, in the 2005 case of Joe Ng Chung-man versus Rever Expression Salon, the court held that a provision was invalid because it required the employee to reimburse the cost of in-house training. This was calculated at six times the plaintiff's average monthly wages.
The court ruled this was unfair because the term in the contract was there to deter the employee from leaving, rather than to recoup training expenses actually paid out. The relevant clauses were held to be a restraint of trade and invalid. In general, the court would not enforce a restraint of trade clause unless it was reasonable as between the parties and not injurious to the public interest.
Under common law, it is a general principle that a "penalty clause" is not enforceable, whereas a clause which provides for liquidated damages, or a genuine pre-estimate of loss, is.
A sum will probably be categorised as a penalty if it is "extravagant or unconscionable" compared with the greatest loss which could conceivably be proved to follow from the breach.
It is therefore important for employers to bear two things in mind. Firstly, any contractual quantification of the loss recoverable from employees arising from wasted training must be a "genuine pre-estimate".
Secondly, a provision in the employment contract will become invalid if there is evidently an element of penalty, or if it appears to impose unreasonable restrictions on the employee moving to work elsewhere.
Where someone resigns just after completing a - presumably expensive - training course, the employer's instinctive reaction might be to try to recover the financial loss by deducting an equivalent amount from payments due to the employee on termination. However, section 32 of the Employment Ordinance (EO) specifically restricts the employer's right to do so. It prohibits deductions from wages or any other sum due to the employee, except for reasons specifically permitted under that section.
The exceptions include situations where money is owed to the employer for absence from work, damage to or loss of goods, recovery of any advance or over-payment of wages, or the recovery of a loan.
The recovery of training costs is not one of the specifically permitted situations. So, unless the employee co-operates, the only way for the employer to recoup any outlay will be by going through the appropriate legal proceedings.
Employers may initiate a claim by issuing a letter of demand, followed by application to the Small Claims Tribunal for amounts below HK$50,000.
If deductions are made in contravention of section 32 of the EO, the employer commits an offence and is liable to a maximum fine of HK$100,000 and maximum imprisonment for one year.
To circumvent this restriction, some companies make a loan to the employee to pay for training and agree in writing that the loan will be waived on completion of the contractual term. Alternatively, the employee can consent to the deduction of the loan from his wages.
Jenny Lee is senior attorney, and Christopher Ma and Ivan Lai are trainee solicitors at Jones Day
