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Ben Jones
Ben Jones, UK Lawyer
Category: Employment Law
Satisfied Customers: 50161
Experience:  Qualified Employment Solicitor
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I'm self employed but currently tied into a contract

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I'm self employed but currently tied into a contract for 3 years as a sole trainer for a training organisation who assisted me in qualifying as an accredited trainer. They have a costly clawback provision to repay if I want to exit - £15,000 Yr 1, £10k yr 2, £5k yr 2. The contract states this is to repay the cost of training but there was no formal training programme provided to me prior to becoming qualified. The training involved some mentoring, several meetings, some emails and a letter of recommendation. Therefore is the Clawback provision an unlawful penalty? The Clawback provisions primary purpose appears to be deterring a breach of contract rather than compensating the company for its loss. Does that make it vulnerable?
Hello, my name is ***** ***** it is my pleasure to assist you with your question today. What do you believe is the value of the training you received?
Customer: replied 2 years ago.

Commercially the qualification is potentially worth a lot as you can make a good profit from running the courses if you are qualified. So it could be perceived that the clawback is to pay for the opportunity to train me (there are only 6 others with the qualification in UK and Ireland). However, the actual cost of providing the training itself cost very little as it was maybe 10 hours of formal input from a Clinical Psychologist at £100 per hour. The difficult part is I had to teach for about 20 days being observed by my mentor but she would usually spend the time on her laptop checking her emails, and very little formal feedback was ever given. But I realise this would be difficult to prove as it's my word against hers apart from the proof of little formal evidence of feedback. If somebody else were to count all those days when she sat at the back, then it does cover the clawback. It is clear to me the clawback is just to discourage me setting up as a competitor but I'm not sure how strong my case to argue that would be.

Hello, sorry I was offline by the time you had replied. Employers can spend a considerable amount of money on training their employees, only to see them leave shortly afterwards. In order to ensure that the employer can provide an employee with training and that the employee does not take advantage of the situation by leaving soon afterwards, it is common practice to have a repayment provision in the contract of employment. Under it the training costs are deemed to constitute a loan to the employee, which becomes repayable if they leave their employment within a certain period after the training completes.
Whilst it is legal to have such clauses, employers must be cautious to ensure that the amount of costs they are trying to recover is a genuine pre-estimate of the damages which they have suffered as a result of the employee leaving early. In the event that it is not, such clauses could be considered a penalty against the employee, which would make it legally unenforceable. Therefore, if the employer has derived some benefit from the employee undertaking the training course during the fixed repayment period (e.g. where an employer has been able to charge customers more for an employee’s services by virtue of that training or qualification) then the amounts which may be recovered from the employee should be reduced to reflect that benefit.
Many employees believe that the amount to be recovered has to reflect the actual cost of the training. That is now it actually works. A clause will only be construed as a penalty if:
• It provides for payment of a specified sum by the employee in the event of his breach of contract; and
• If the sum specified is "extravagant and unconscionable" in comparison with the greatest loss that could possibly have been proved as a result of the breach
Each case will of course turn on its own facts and the circumstances of the termination of employment, together with the amounts repayable by the employee will be relevant to determining if the clause is in fact a penalty.
The contract should also contain a sliding scale of repayment whereby the repayment amount reduces according to the length of time the employee remains with the employer after the training has been completed. For example, 100% of the fees to be repaid if the employee leaves within 0-12 months after the training has finished, 50% if they leave 12-24 months after, 25% if they leave 24 - 36 months after.
If the matter goes to court, it would be for the employer to show that the repayment clause was reasonably drafted and that the costs they are trying to recover are reasonable in the circumstances.
I hope this has answered your query. Please take a second to leave a positive rating, or if you need me to clarify anything before you go - please get back to me and I will assist further as best as I can. Thank you
Customer: replied 2 years ago.

Hi Ben

Thanks for the answer.

I am particularly interested in the part that states ...if the employer has derived some benefit from the employee undertaking the training course during the fixed repayment period (e.g. where an employer has been able to charge customers more for an employee’s services by virtue of that training or qualification) then the amounts which may be recovered from the employee should be reduced to reflect that benefit.

I now run courses for this company who charge £150 per day for each attendee, usually for up to 12 per day (£1800) but sometimes up to 36. My fee is £650 per training day. They obviously cover venue and manual costs plus my travel/accommodation which I estimate at £300 per day. I|f we go over 12 they employ an assistant at £300 per day. They also have administration costs to cover. However even taking that into account it seems to be a heavy profit margin and even if I only work 1 year of the contract (around 30 days) I would have earned the company significant profits.

Would that mean my 'clawback provision' is more likely to perceived in the court as a penalty instead of a repayment?



Hello Matt, yes there is an argument that the costs the employer may be able to recover should be reduced to cover these benefits. However, it would depend on the training you provide being possible as a direct result of the training you received, the costs of which they are trying to claw back. But this is still not a black and white argument, these things are always open to challenge and interpretation in the courts, but you may certainly use it to your advantage.
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Customer: replied 2 years ago.

Hi Ben

Thanks for the additional advice.

It seems that it could be argued both ways and clearly will be down to the court to decide if I go down that route.

However, it is likely that if I try to argue the point legally that the costs of that outweigh the cost of the clawback provision or are there low cost legal options e.g., small claims court, even if I win?



Hello Matt, unless your contract has a provision allowing the employer to deduct the costs from your pay, then it would be for them to issue proceedings in court to claw that amount back. If the claim is below £10k then it would go to the small claims court and each party would meet its own legal costs. So the risks of you defending this if it is within these limits would be relatively small. The issue would be if the amount is above the small claims court limits and then the losing party could be made liable to pay the other side’s legal costs and expenses. So that I where the risks increase significantly and you are best advised to seek formal legal advice to see if there is any point in actually defending this.
Customer: replied 2 years ago.

Thanks Ben. Sorry for all the follow on questions.

The amount is exactly £10k. Does it have to below that (even by £1) to be small claims court?

Also, if I decide to pay the clawback provision and give them the 3 months notice as detailed in the contract, I presume then the contract would be deemed as closed and they would have no further control over me as the contract does not mention any restriction of trade following the completion of the contract.

Thanks again

Hello, the limit is £10,000 so if it is £10,001 then it would not be in the small claims court, therefore if it is exactly £10k it would be there.
You are correct that the contract would be terminated and if there are no post-termination restrictive covenants then the relationship between you and the employer would come to an end
Customer: replied 2 years ago.

Thanks Ben. That's really useful

you are welcome, all the best