California Employee Education Benefit

Sometimes employers offer their employees a paid education benefit in order to increase the employee's value. The terms of the agreement are governed by general contract law. If the agreement is breached, the employer cannot deduct an employee's wages to recover paid tuition or other education payments.

Does the Labor Code Govern Tuition Payment Plans?

No. Whether an employer will pay for an educational benefit (even if it is to the employer's advantage), how much an employer will, what time-off is permitted the employee, etc., are not governed by the Labor Code, but are contractual issues that are either set forth in company policy, or individually negotiated with employees.

This means that education benefit plans, and consequences for the employee if the contract terms are breached, are generally enforceable, subject to some labor code requirements that are subsequently discussed.

What if the Employer Requires that Certain Classes be Taken?

If an employer requires that an employee incur any expense, including further education, the employer must reimburse the employee for all those costs.

Lawzilla Cross-Reference: Expense Reimbursement.

If an Employee Must Reimburse the Benefit, Can the Payment be Deducted from their Final Paycheck?

No.

Assume an employer agrees to pay for a class and the employee agrees to pay back their employer if they resign within a year of taking the class. The employee resigns 6-months later. The employer cannot deduct all, or any part of the amount owed from the employee's final paycheck.

In Barnhill v. Robert Saunders and Co. (1981) 125 Cal.App.3d 1, after an employee was terminated the employer deducted from the final paycheck the balance of a promissory note owed to the employer. The note allowed payments to be made by payroll deductions. The court held that deducting the remaining amount owed on the note from the final paycheck was illegal. Wages are exempt from attachment and an employer cannot setoff wages owed by any amount the employee may owe.

Labor Code § 221 states that "It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee."

Although Labor Code § 224 allows deductions when authorized by the employee in writing, that authorization is limited to (1) insurance premiums, (2) hospital or medical dues, or (3) other deductions not amounting to a rebate or deduction from the wage paid to the employee. Section 224 may not, consequently, be relied upon to allow an employer to deduct an amount from an employee's pay which is for the use or benefit of the employer.

Such a "self-help" remedy of deducting an employee's wages to pay a debt will also likely violate California's wage garnishment law.

What if Agreement Requires the Employee to Reimburse the Benefit if they Leave the Business Within a Certain Period of Time, but the Agreement is Silent about Repayment Terms

An agreement can require that an employee reimburse their employer if they voluntarily leave within a certain period of time. Such an agreement may be more difficult to enforce if the employee is terminated, particularly if they are terminated without cause, because that leaves contractual terms within the sole control of the employer.

As an example, assume an agreement says that the employee will reimburse their employer for a class if they resign their job within one year. The employee leaves within one year. When is repayment due?

Repayment is due once the employee leaves their job. As soon as the condition for repayment occurs, the obligation immediately springs into existence.

In this situation the employer will often want to remind the employee of their obligation and request repayment as soon as possible. If from the circumstances it is apparent that the employee may not be able to afford immediate, total payment, then the employer should take the initiative in drafting a repayment plan that is reasonable for the situation. The employer cannot unilaterally force a repayment play upon an employee in this situation, that is something the employer should have thought of before the policy or agreement was made. Usually, a reasonable arrangement can be reached with the employee.

Does the Employee Always Have to Payback Educational Benefits Paid on Their Behalf When They Leave?

No. The "default" is that an employee does not have to payback an education benefit if they leave employ. The reimbursement issue only arises if there is a condition in the policy or contract requiring the reimbursement. Most commonly, this is when the employee agrees not to leave employ within a certain period of time after receiving the education benefit, but if they do, they have to repay all or a portion of the benefit.

What if an Employee is Obligated to Payback a Benefit but they Refuse?

The employer's recourse is to file a lawsuit. If there is a binding arbitration agreement then an arbitration claim would be filed.

What is a Sample Policy?

It is the policy of Company to support the efforts of its employees to further their education when such improvement is in the best interest of the Company.

Company shall reimburse employees for seminars, courses, classes or workshops for an employee to perform work in their normal job classification. Reimbursement shall be made after the class is satisfactorily completed as verified by a certificate of successful completion or a passing grade report.

Attendance at classes and study will be during non-work hours.

Reimbursement approval must be obtained in writing by employee's direct supervisor prior to beginning the course.

Reimbursement of tuition and fees will be made after successful completion of the course as verified by a certificate of completion or a passing grade report.

Study must be by class attendance. Online Internet or mail correspondence courses are not reimbursable.

Courses that are unrelated to the employee's job are not reimbursable even though the course may lead to a degree that is related.

The cost of materials and books is not reimbursable as they become private property once purchased and may be sold after course completion.

The employee must be a regular full-time employee at the time the education course is started, and must continue to be employed during the duration of the course.

Employee must agree in writing to continue their employment with Company for one year following completion of the course and in the event they fail to do so, to reimburse the Company for the entire amount paid. Payment to be made within 90 days after termination of employment.