A clause requiring an employee to repay training or other costs incurred by an employer if the employee leaves employment within a certain period of the costs being incurred may be a penalty. If it is a penalty, because the purpose of the clause is to stop the employee from leaving employment rather than a genuine attempt to compensate the employer for its loss, it will not be enforceable.
In Cleeve Link Ltd v Bryla the EAT considered whether a repayment clause relating to certain recruitment costs incurred by the employer in hiring the employee was unenforceable as a penalty. If so, the employer made an unauthorised deduction from the employee's wages when it deducted the recruitment expenses from her final salary payment.
The claimant was recruited by the respondent as a live-in care worker. Her contract of employment provided that if she was dismissed for misconduct or if she left employment voluntarily within six months of starting work, she would be liable to repay to the employer various recruitment costs which it had incurred in connection with her employment. After six months of employment, the monies that could be recouped decreased over six months in line with a sliding scale. Any monies owing under the clause would be recovered by way of a deduction from the employee's final salary payment.
Within three months of her recruitment the claimant was dismissed for misconduct. She argued that the repayment clause was a penalty and that the respondent could not rely upon it. The EAT disagreed. The enforceability of the clause had to be judged at the time the agreement was entered into. If the employee had resigned the day after she started employment, the amount claimed would have represented the loss the employer sustained. On that basis the clause was not a penalty but a genuine pre-estimate of loss and the employer had not made an unauthorised deduction from the claimant's final wages.