Reimbursement of inflated training costs

[Chaulender]

A friend of mine worked as a delivery driver.

 

During his employment, the company arranged for him to undertake driver training and a test to enable him to drive larger vehicles.

 

He signed an agreement requiring him to repay the training costs if he left within two years.

 

On that document was the phrase "total training costs £2000" below the signatures.

 

Three days after the agreement was signed (and before the training actually took place)

he had an assessment session with the external driver training provider who said his ability was such that only a few training sessions were needed,

and the total cost of the training and examination (which he passed) came to c £950.

 

He left the company seven months after the agreement was signed and expected to have to repay the £950.

 

However, the company is claiming £2000 "because that was what he signed for".

 

He has refused to pay more than the actual cost incurred and now has received a solicitor's letter demanding the £2000.

 

I have read about re-claim of training costs and understand any reclaim must be based on "a genuine pre-estimate of costs",

and that anything above that may be deemed a penalty and thus not legally enforceable.

 

In this instance the actual costs were less than half of that estimate and were known before the training was undertaken.

 

Paying anything more than £950 would mean not only does the company contribute nothing to training,

but they also make a profit from it!

 

Where do you think he stands legally on this?

 

Secondly, I understand that such repayment agreements should include a sliding scale,

so the amount reclaimed reduces over time to reflect the value the company gets from the training.

 

This agreement had a sliding scale but it was very back-skewed

- 100% repayable up to 18 months,

75% up to 21 months,

50% up to 24 months.

 

they had just over six months of value from his ability to drive their larger vehicles

but the sliding scale makes no reflection of that.

 

Again, does that stand up legally?

[dx100uk]

I would ask to see the invoice of what the company was charged.

 

if they were only charged £950

then that's all they can demand.

 

dx

[Chaulender]

He has asked for that (in writing) and they have refused, saying they are not legally obliged to provide it; and anyway, it's not relevant because the agreement said £2000. (The company don't dispute that the actual cost was £950).

[Sidewinder]

Was the driver training the only formal training that he received? What about special H&S training or any other form of instruction?

 

Could do with knowing exactly what is stated in the contract about repaying training costs - the statement 'total training costs £2000' could be interpreted to include any and all training that he received as it stands, and doesn't make it specifically about the driving instruction. On that point, as a specific amount is stated, and has been signed in agreement, it might be tricky to get around - it would be far easier if the clause stated that 'the cost of training must be repaid' as there would then be more of an onus on the employer to quantify the claim.

 

On balance however I would still be demanding a breakdown of the costs, and make it clear to the solicitor that his has been requested, and in the event of a claim the employer would be put to strict proof of the cost, as this was known to be £950 and not £2000

[Chaulender]

This was a specific contract relating to driver training to drive larger vehicles. The contract specifically states (I've just selected the relevant bit here) "If I leave employment at any time before the end of the minimum period, I will refund to my employer an amount proportionate to the unexpired portion of the contracted minimum period of service (calculated on a sliding scale) made up of the following: a) the course fees for the full course of study/training and b) any relevant examination fee paid on my behalf. Below the signature is the phrase "total course fees £2000".

 

 

Having searched further on the internet, it seems that this is a "liquidated damages" contract often used in the construction industry, where damages for breach of contract are set at a specific sum upfront rather than whatever actual costs are incurred, but that sum needs to be a "genuine pre-estimate of costs" - in this instance, the professional trainer predicted those costs to be less than half that sum just two days after the contract was signed, so I don't see how it could be a genuine pre-estimate.

[steampowered]

'total course fees £2000' could mean anything. It does not say that the amount which must be repaid by the employee is £2000. It is completely ambiguous. It could be just making him aware of the predicted cost of the training.

 

You can also mention that a fixed sum of £2000 clearly would not be a genuine pre-estimate of loss and is consequently unenforceable as a penalty clause.

 

I would simply write back saying that the actual training costs were only £950 and there is nothing in the contract that states he must pay any more than that. As the solicitor will be aware, any ambiguity in the contract will be construed against the employer as the person who wrote it. I think you should mention both points. It is actually an open question whether repayment of training costs comes within the law against penalty clauses, since the event which triggers repayment (termination of employment) is not technically a breach of contract. There is a legal view out there that the whole 'genuine pre-estimate of loss' stuff is not relevant to repayment of training cost clauses.

 

The sliding scale doesn't sound too unreasonable to me, I think you would struggle to say the duration of the scale makes the clause a penalty.

 

Bear in mind if you successfully go down the penalty clause/liquidated damages route, the court is not able to amend the clause to make it not a penalty. The whole thing would be unenforceable. This would mean that the employee has no liability to pay training costs at all, not even the £950. That could be mentioned to the employer if the employee is feeling aggressive.

[Sidewinder]

That's OK then. If the driver training was the only extraordinary cost incurred by the employer, and if it can be proved that £950 was the full cost of that training, then it cannot be held that £2000 is a fair representation of the 'training cost'. Be careful if you enter a dialogue over 'liquidated damages' with a solicitor - there is case law to suggest that an employer need not have to prove that the amount claimed is a genuine amount - merely that it should be a reasonable amount considered accurate at the time the contract was formed. If the going rate for training was £2000 at the time the contract was formed then this may well be a 'genuine' pre-estimate and that was agreed by signing the contract - there is no provision made for that amount to be lowered or negotiable in the event of a breach. Semantics I know, but that is what lawyers are perfectly capable of turning cases on.

 

In support of your case would be MBI UK Ltd v Quigley, an EAT Judgment, where it was held that the employer could not deduct a fixed sum in respect of training where there was no evidence that any material training had taken place. Elements of that Judgment might be applied successfully to your case, providing that it can be proved that the training provider did actually only invoice the employer for £950 - so, back to strict proof of the amount being claimed.

[Chaulender]

Thank you both sidewinder and steampowered for your advice.

 

 

My only concern about whether £2000 is a "genuine pre-estimate of costs" is that the course fee would, of course, vary according to the ability of the individual. In my friend's case, he had driven, including professionally, for a long time and the training company recognised he needed only the minimum number of lessons before the exam. Others may have needed many more lessons in which case the cost could conceivably have reached £2000. My fear is that if this went to court, they could say £2000 is a genuine estimate because at the time of signing the contract (two days before the assessment) they didn't know how much it might cost - maybe £1000, maybe £2000, maybe more. Of course, in that instance the better drivers would end up subsidising the less good drivers! Do you think that's a real concern?

[BazzaS]

That's OK then. If the driver training was the only extraordinary cost incurred by the employer, and if it can be proved that £950 was the full cost of that training, then it cannot be held that £2000 is a fair representation of the 'training cost'. Be careful if you enter a dialogue over 'liquidated damages' with a solicitor - there is case law to suggest that an employer need not have to prove that the amount claimed is a genuine amount - merely that it should be a reasonable amount considered accurate at the time the contract was formed. If the going rate for training was £2000 at the time the contract was formed then this may well be a 'genuine' pre-estimate and that was agreed by signing the contract - there is no provision made for that amount to be lowered or negotiable in the event of a breach. Semantics I know, but that is what lawyers are perfectly capable of turning cases on.

 

In support of your case would be MBI UK Ltd v Quigley, an EAT Judgment, where it was held that the employer could not deduct a fixed sum in respect of training where there was no evidence that any material training had taken place. Elements of that Judgment might be applied successfully to your case, providing that it can be proved that the training provider did actually only invoice the employer for £950 - so, back to strict proof of the amount being claimed.

 

With regard to GPEOL / liquidated damages : it is true that it only has to be a genuine pre-estimate, not the true value of loss.

 

If the true value was close to 2k, a court would uphold the 2k.

But £950 is a very different sum : and in Dunlop v New Motors Garage (the leading case on GPEOL)

 

( b ) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid

 

http://en.m.wikipedia.org/wiki/Dunlop_Pneumatic_Tyre_Co_Ltd_v_New_Garage_%26_Motor_Co_Ltd

[Chaulender]

Returning to an old thread here, because the issue remains live, and I found your previous replies very helpful.

 

 

My friend reverted to the earlier solicitors letter referring to the points discussed below - namely that the claimed £2000 is so different from the actual training cost of £950 that it cannot be a genuine pre-estimate of costs, and represented a penalty against my friend resigning.

 

 

Today we have received a further solicitors letter basically saying

1) that £2000 is payable because that was the figure on the agreement he signed

2) that the £2000 includes not only course fees, but also management time costs, administration costs and the fact that the company would have to pay for training of a replacement driver (!!!)

3) they confirm my friend is owed £580 in withheld wages which they will offset against the £2000, making a net claim of £1420.

 

 

I think they've stitched themselves up here and I think it's time to be a bit more aggressive; but I want to check this course of action because we reply.

 

 

1) the agreement was specific about what can be reclaimed. The four cost categories are a) course fees, b) examination fees, c) equipment/books, d) allowances/expenses paid to the employee to attend the course. Nowhere does it say anything about administration fees, management time costs or costs of training replacement employees. Therefore surely this is an admittance that the £2000 is not valid (in which case the whole agreement is not valid, as steampowered said 10/08). We intend outlining this argument and saying he does not intend making any payment.

2) they have given written confirmation that wages of £580 remain outstanding. Whilst my friend had offered for them to keep the withheld wages as full and final settlement of the training reimbursement, they have chosen not to accept that. We now intend separating the two issues, revoking the earlier offer, requesting payment of the £580 and pursuing recovery through the small claims court if not repaid (which I'm sure it won't be).

 

 

Are there any legal flaws in taking this position?

 

 

Separately, does communicating with a party's solicitor count (legally) as communicating directly with the party? In demanding the return of the withheld wages, is it sufficient to make that claim to their solicitors or does a copy also need to be sent direct to the company?

 

 

Thanks

[steampowered]

I completely agree.

 

Things such as management time, administration costs and the costs of hiring a replacement driver are not normally 'training costs'. If these things were intended to be covered the agreement would need to say so expressly. There is nothing in the scrappy handwritten bit at the bottom which suggests that these items were included.

 

I would get on with it - letter before action giving them 14 days to confirm repayment, and start small claims action if repayment is not made.

 

It is sufficient to communicate with their solicitors.

 

Poking the bear will always create a risk that they might counterclaim, although I feel you would have a solid defence to that. The other risk to take in mind is that this employer is not obliged to give a reference, and could give a negative reference if asked.

[Chaulender]

Thanks again steampowered - that's reassuring.

 

 

The full wording of the four categories of costs that can be recovered definitely does not include administration, management time or training of another employee. In fact, even to suggest the last one sounds ludicrous to me. And there was nothing below the signatures except for the wording "total training costs £2000" (which was in fact printed).

 

 

My only nagging doubt is why the lawyers (and they're corporate lawyers of significant size) would suggest that they're entitled to charge those costs. Unless they're simply putting in writing what their client has told them to say - the letter does start by saying "we refer to your [last] letter upon which we have taken our full instructions." But if it is a wrong position, shouldn't they, as lawyers, advise the client of that? Or might they simply be chancing things to see if they can scare my friend into paying?

[steampowered]

I wouldn't put too much stock into the fact that the letter has come from a law firm. It is a lawyer's job to argue their client's case - they are required to do this even if it is a weak case unsupported by evidence. It is common for a lawyer to be instructed to adopt a 'strong' stance with the other side even while advising their client that they are in the weak position.

 

If this is a reasonably large firm, their fees for dealing with dealing with even a very simple small claims case would vastly exceed the amount in dispute here. Furthermore it is extremely unlikely that the employer would be able to recover those costs even if the employer won. This puts you in a very strong position.

 

To be honest, if there are outstanding wages left after taking into account the c.950, and the chance of getting a reference has been written off, I would just proceed with small claims action. I'd even argue the toss and try to say that the whole thing is a penalty - that argument is not likely to succeed but it is arguable and worth a go if you are ending up court anyway.

[stevemLS]

Steampowered - I am missing something, why on earth would the ex-employee initiate proceedings in this instance?

[SabreSheep]

OK sounds like a Coach or Bus company. Standard clause to prevent taking the training getting the licence then buggering off.

 

However does not make it enforceable.

 

A) Genuine pre estimate of costs. On the contract I signed previously It had these broken down. HOWEVER I believe that it neglected to take into account the fact that trainees seldom learn alone

 

B) Training in these contracts are normally done INHOUSE so there is noone to invoice them except (Where used) test fees for external examiners.

 

C) IN court they would have to justify their costs.

 

D) Costs of training another driver- Double Billing as the "Other Driver" would surly be paying if he left for any training costs incurred

[steampowered]

Steampowered - I am missing something, why on earth would the ex-employee initiate proceedings in this instance?

 

To recover the 580 unpaid wages. Although, having thought about this a bit more, if that is less than the 950 training costs outstanding perhaps it would be better to let sleeping dogs lie (simply tell the employer no repayment will be made, and defend proceedings if they are brought - seems unlikely given the amounts involved).

[Chaulender]

Steampowered - yes, that's right, the 580 owed by them is less than the 950 known to be the actual cost of the course + examination. The reason we were thinking of making a claim for the 580 is as follows:

 

 

1) he has always offered to pay the 950 actual cost but they are not prepared to agree to that saying 2000 is what he signed up to.

 

 

2) we now have in writing that the 2000 includes items which fall outside the four categories of costs listed for recovery on the agreement.

 

 

3) if they did initiate proceedings, I understand the court cannot vary the amount of the agreement - it has to conclude that the agreement is either valid (and 2000 is owed) or not valid (with nothing owed). IF I HAVE THAT WRONG, SOMEONE PLEASE SAY

 

 

4) Taking 2) and 3) together I cannot see how any court could therefore uphold the agreement

 

 

5) We now have in writing for the first time that they have withheld 580 in net pay. (We think the figure should be 100 or so higher than that but don't intend challenging the number). Therefore, if the training agreement is invalid, we thought it worth pursuing recovery of the 580 through the Small Claims Court.

 

 

If we did that, would the SCC look at the withheld wages in isolation, or would it consider the validity of a counterclaim that he owes 2000 under the training agreement? If it was considered in isolation I'd be inclined to go for it. This is by no means a model company. They issued no payslips through his employment, he's never received a P45, and they repeatedly asked him to drive larger vehicles after completion of his training but before he had completed the legally-required PCP. Given this, and their refusal to budge from the 2000, I'd be inclined to get whatever he can from them.

[Chaulender]

....and, incidentally, you made the point about future references, but my friend is now employed by a much more reputable company and is doing very well; so no need for references from this lot! Good point though.

[steampowered]

3) if they did initiate proceedings, I understand the court cannot vary the amount of the agreement - it has to conclude that the agreement is either valid (and 2000 is owed) or not valid (with nothing owed). IF I HAVE THAT WRONG, SOMEONE PLEASE SAY

 

My interpretation of all this is that the clause for repayment of training costs in the main contract is probably valid. The scrappy handwriting written at the end is probably not valid because it is too uncertain for a court to enforce. If you disregard the handwriting but the contract says training costs need to repaid, it sounds like the court would have a basis for awarding repayment of the £950.

 

5) We now have in writing for the first time that they have withheld 580 in net pay. (We think the figure should be 100 or so higher than that but don't intend challenging the number). Therefore, if the training agreement is invalid, we thought it worth pursuing recovery of the 580 through the Small Claims Court.

If you do end up in court you might as well claim the higher amount!

 

If we did that, would the SCC look at the withheld wages in isolation, or would it consider the validity of a counterclaim that he owes 2000 under the training agreement?

When the employer files its Defence it would have the opportunity to raise a counterclaim at the same time. Your claim and the counterclaim would then both be considered at the same hearing.

 

I don't suppose his employment ended less than 3 months ago? If so, he could bring an Employment Tribunal claim for unlawful deduction of wages. The fees would be higher but the employer would not be able to counterclaim. If it was more than 3 months ago then he is stuck with SCC.

[Chaulender]

Understood. However the cost phrase under the signatures wasn't handwritten - it was printed and said "total training costs £2000" (though my friend cannot recall seeing that when he signed, and it certainly wasn't highlighted to him nor that amount discussed). Does the fact that it's printed change your viewpoint?

 

 

Yes, he left back in April - this has been dragging on, but they're not letting it drop.

[steampowered]

Understood. However the cost phrase under the signatures wasn't handwritten - it was printed and said "total training costs £2000" (though my friend cannot recall seeing that when he signed, and it certainly wasn't highlighted to him nor that amount discussed). Does the fact that it's printed change your viewpoint?

No, it doesn't change my view. "total training costs £2000" could mean anything - particularly given that it was written before it was discovered he would need less training than expected.

 

Yes, he left back in April - this has been dragging on, but they're not letting it drop.

I see. It may be best to just tell them that he won't be paying and that he will counterclaim for unpaid wages if a claim is brought.

[Chaulender]

Thank you for your advice. I'll post what eventually happens, in due course.