When workback agreements go awry – and how to avoid this
Henry Ford is credited with once saying, “The only thing worse than training your employees and having them leave is not training them and having them stay.” This famous adage highlights the importance of investing in employee development, even at the risk of them leaving.
However, a potentially worse situation that Mr Ford may not have considered is when employees owe money to the company when they leave, particularly if the employer had invested in their training through bursaries, educational sponsorships, or loans.
Balancing the need for employee growth with the potential financial consequences of their departure becomes a crucial challenge for businesses.
Agreement Details and Understanding
‘Workback’ agreements, also known as ‘claw-back’, or even ‘Stay-or-Pay’ agreements, are contractual arrangements between employers and employees that require employees to remain with the company for a specific period after receiving certain benefits, such as training, education, tuition reimbursement, or loans.
In addition, when an employer provides tuition funding, it comes with the belief that the provided funds will be used solely for their intended purpose. Misuse of such funds, whether for personal expenses or non-related courses, may constitute a breach of trust and can result in serious consequences for the employee, including disciplinary action, demands for reimbursement, or even termination.
These conditions primarily aim to ensure that the employer receives a return on its investment in an employee’s professional development and marketability.
Case Law
The recent case of Mabhaso v Astron Energy (Pty) Ltd and Others handed down in September 2024 exemplifies employers addressing the misuse of bursary funds for personal purposes. The employee was found guilty and dismissed for misappropriation and unauthorised use of company funds when it was uncovered that he had misused bursary funds, provided by his employer, for personal expenses rather than the intended educational purpose. In the arbitration hearing, the employee argued that because there was no specific timeline in the company’s policy to pay money to the educational institution, he was entitled to use the funds for personal expenses and to pay the rest to the institution at a later stage. This argument was rejected not only because it contradicted an additional version made by the employee in proceedings that he had ‘made a mistake to not pay over the full initial amount’, but that the court accepted that the provision of the funds by the employer was solely to pay the employee’s tuition fees.
In another recent unreported case of Holtzhausen v Grandmark International (Pty) Ltd from 31 August 2024, an ex-employee applied to the Labour Court to interdict her (ex)employer who had recovered funds owed from the employee’s final salary payment. Despite the employee having concluded a ‘Workback Contract/Agreement’, in terms of which she confirmed that the employer granted her a bursary to complete her MBA with an institution in the USA, she subsequently resigned within the workback period, and the employer deducted amounts from her final salary in terms of the agreement. While the employee’s labour court application was effectively moot given the fact that the deductions had already been made from her final payments, it did highlight the argument raised relating to the maximum amount that may be deducted from employees at any given time following such agreements. In casu it was challenged that permission to deduct some amounts was not given and that the deduction of the total amount from her final salary was contrary to the provisions of the Basic Conditions of Employment Act (BCEA). Section 34(2)(d) of the BCEA provides that the total deductions from an employee’s remuneration must not exceed one-quarter of the employee’s remuneration in money, meaning that an employer would be limited in its ability to recover any debt through salary deductions from any final remuneration payments owed to a leaving employee.
Clarity is Key
These recent matters, although unreportable, underscore the necessity for both employers and employees to clearly define the conditions under which workback clauses will be invoked as well as ensuring they are correctly drafted to avoid any overreach that could violate employment law protections. The courts have accepted that bursary funds are to be used strictly in line with an agreement between the employer and employee and that misusing such funds, even with justifications such as personal financial difficulties, constitutes a breach of the agreement and can be a justifiable reason to terminate employment.
Enforcement and Equity
Workback agreements offer a valuable way for employers to invest in their workforce while minimising the financial risk of employees leaving before delivering a return on the investment. However, clear terms and adherence to labour regulations are essential to making these agreements enforceable and equitable.
All things considered, perhaps it was in fact Sir Richard Branson who summed up the conundrum best by saying, “Train people well enough so they can leave. Treat them well enough so they don’t want to.”
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