There are certain circumstances under which an employer may recoup costs of an employer-sponsored training program from an employee without violating the California Labor Code. Recently, the Court of Appeal in USS POSCO Industries v. Floyd Case (2016) 244 Cal.App.4th 197, held that an employee who voluntarily enrolled in a three-year, employer-sponsored educational program, was bound by the contract he entered into agreeing that if he quit his job within 30 months of completing the program, he would reimburse his employer a prorated portion of program costs. Floyd Case began his employment with USS POSCO Industries (UPI) as an entry-level laborer. He thereafter sought to become a maintenance technical electrical (MTE) worker. To qualify to do so, Mr. Case had to take and pass UPI’s MTE exam. Before taking the exam he decided to go through UPI’s MTE training program. When Mr. Case quit his job two months after completing the training course, the company sought to enforce its agreement with him and recover costs. The company sued him for breach of contract and he countersued claiming the contract violated various provisions of the California Labor Code.

Mr. Case was neither forced to take the training course to become a MTE nor was he required by UPI to take the training through UPI; he voluntarily elected to do so. Accordingly, the court found that (1) the voluntary optional nature of the program did not violate California Labor Code section 2802, which requires employers to pay for all necessary expenses in direct consequence of the employee’s job duties, and (2) the agreement did not violate section 450 of the Labor Code, which prohibits employers from requiring employees to patronize the goods and services the employer offers.

The court distinguished this matter from In Re Acknowledgment Cases (2015) 239 Cal.App.4th 1498, stemming from the requirement by the City of Los Angeles that all newly hired police officers attend and graduate from the Los Angeles Police Academy. The city sought to find a way to curtail the attrition of newly hired officers. The city enacted Los Angeles Administrative Code section 4.1700 (LAAC § 4.1700), which provides, in part, that any police officer hired by the Los Angeles Police Department (LAPD) is required to reimburse the city a prorated portion of the cost of training at the academy if he or she voluntarily leaves the LAPD after serving less than 60 months following graduation and goes to work for another law enforcement agency within one year after terminating employment with the LAPD.

LAAC § 4.1700 further provides that upon application for a job as a police officer, the applicant shall sign an agreement stating that he or she intends to maintain employment with the LAPD for at least 60 continuous months and agreeing to reimburse the city for the direct and indirect costs of training if he or she leaves the LAPD within five years after graduation and becomes employed by another law enforcement agency within one year after leaving the LAPD. The agreement is called “the acknowledgment.” In the In Re Acknowledgment Cases, the Court of Appeal ultimately determined that because the LAPD created its own training program and mandated its newly hired officers to attend, Labor Code section 2802, which requires that the employer bear the cost of training it requires to enable employees to discharge their duties, applies. Accordingly, the city could not seek reimbursement under such circumstances.

While the case law continues to develop in this area, employers should use caution and consult counsel when attempting to develop training or other programs where they seek to recover the costs of those programs from employees.