As demonstrated in two recent Beijing cases, a key factor that courts will look at in training bond cases is whether the employee was provided specialized technical training. Companies that spend large amounts on training employees often expect the employees to remain with the company for a certain minimum service period, and will try to recover the training costs if the employee leaves before the end of the service period.
In August 2015, the People’s Court in the Haidian District in Beijing ruled against an employer claiming training costs against an ex-employee who resigned from the company allegedly in violation of the minimum service period under a training bond. The court took the view that the training the employer provided to the employee did not constitute “specialized technical training” and thus the training agreement providing for a minimum service period was unenforceable.
In this case, the company was in the business of air conditioner maintenance and repair, and the employee was an air conditioner maintenance worker. The company sent the employee to an air conditioner manufacturer for technical training seven times during his employment. The court believed that this constituted basic training for a regular job at the company, and was not for a sufficiently specialized role, and therefore, the company could not impose a minimum service period on the employee.
Under the PRC Employment Contract Law, employers may demand reimbursement of training costs in accordance with a training bond agreement in certain situations. If the employer has funded specialized technical training for the employee from a separate training fund allocated for that purpose, then they may impose a minimum service period and require the employee to return a portion of the training costs (pro-rated based on the portion of the service period still remaining) if the employee fails to fulfil the minimum service period.
The Beijing High People’s Court wrote a commentary following this case, stating that the training which will qualify for enforcing a training bond should include that offered for “specialized” positions and aimed at improving the employee’s “specialized” knowledge and skills, and that regular on-the-job or before-the-job trainings will not qualify.
In another recent Beijing case, a pilot learned to his detriment that his position did constitute a “specialized” one. The Beijing court ruled in favor of an airline that brought a claim against a former employee (pilot) for training costs of 1.4 million yuan.
The employee joined the airline in September 2001 as a pilot. In 2012, the pilot terminated his employment contract with the company and afterwards successfully sued the company for unpaid annual leave and overtime, and the court also ordered the airline company to complete all termination procedures and handover the pilot’s license back to him. In 2013, the company then brought its own claim against the pilot for 3.34 million yuan, which related to training costs that they had incurred in relation to his employment. The final court decision was only recently issued.
The court held that the airline had to heavily invest in training the pilot over a number of years in order to ensure that he had the appropriate skills and experience to undertake his duties. In light of this significant financial investment, it was reasonable to be compensated for the training costs. However, the airline failed to provide enough proof of expenditure on training costs to substantiate its full claim for 3.34 million yuan and was awarded 1.4 million yuan instead.
Key Take-Away Points
Employers should be aware that costs incurred for training may not entitle the company to impose a minimum service period, even if a training agreement is signed. Courts may distinguish between the types of training and types of positions subject to a training requirement to determine the enforceability of the training bond. Companies may evaluate and re-structure their current training programs offered to valued employees to increase the likelihood of the enforcement of their training bond.