Training Bond-> Employee can be ordered to repay training costs

Employers generally follow the below basic guidelines relating to training bonds:
• When providing an employee with the opportunity to attend an expensive training course, they consider entering a bond agreement with the employee requiring repayment of training costs if the employee resigns shortly after completing the training course.

• As it is not always the case that a bond agreement will be enforceable, employers obtain legal advice on drafting such an agreement to maximize the likelihood of being able to require repayment if the employee resigns and refuses to repay the agreed amount.

Consider the case of Surveillance Australia Pvt Ltd v McClennan where the Magistrates Court of South Australia asked an employee to repay part of a training bond to her employer when she resigned.

The employer hired a pilot on a small aircraft and offered her a promotion on a Dash 8 aircraft provided she signed a training bond before commencing the necessary training course. The bond agreement required the pilot to repay $20,000 if she resigned within three years of completing the training, but reduced on a pro rata basis. The pilot resigned after seven months and refused to repay $16,366 as required under the agreement.

The employer had introduced training bonds because it wanted a return on its training investment and wished to discourage training to those pilots who were considering leaving.

The pilot unsuccessfully argued that the bond agreement was unenforceable for reasons including that

• it was a “penalty”;
• it was signed under duress;
• it was unconscionable in contravention of provisions in the Trade Practices Act 1974;
• it was a restraint of trade; and
• it breached her AWA (Australian workplace agreement)

However, the court rejected these arguments and gave the following rulings:

• The repayment was not a “penalty” as it was an estimate of the cost to the employer if the pilot left her employment prior to the end of the three year period.

• Enforcing the bond was not a restraint of trade as the pilot was permitted to resign provided she gave notice as set out in the AWA.

• The particular AWA was not an exhaustive statement of the pilot and the employer’s rights and obligations and hence the bond agreement was valid in addition to the AWA.