No Good Deed Goes Unpunished - Training Repayment Agreements

By Michael Santo, COSHRM Legislative Director and Managing Attorney at Bechtel & Santo

You’re sitting in your comfy office chair recently, when one of your managers bursts into your office and asks, “You know that new employee you hired?” You, of course, don’t exactly recall that “you” hired the new employee. In fact, you distinctly recall that someone looking a lot like “you” told the manager that the then-applicant seemed a little underqualified for the position. But before you can pull out your “I-told-you-so” card, the manager says, “I mean, don’t get me wrong.  I don’t think the new employee is a total disappointment.  So, I’m not mad at you per se. In fact, I’ve got hopes that with some pretty significant training, the employee will be crushing it in no time. I found this training, which will cost us around $10,000.00, that should do the trick.  Oh, I also don’t want the new employee working anywhere else but for us after we train him.  So, make sure that he can’t. Make that all happen stat!!” And, with that, the manager leaves. As you silently calculate how many hours left in the workweek until the weekend, you also think, “time to pull another rabbit out of the hat.” Unfortunately, due to recent efforts by the Colorado legislature, there aren’t quite as many rabbits in that hat as there used to be. 

That is, Colorado Governor Polis recently signed a bill called “Attorney General Restrictive Employment Agreement.” That yawn-inducing title aside, the bill packs a lot of wallop. For example, prior to the bill, Colorado employers that provide training to an employee could require the employee to pay back a proportionate share of the training cost based on how long it had been since the employee took the training. But the Colorado legislature was concerned such agreements, which are often referred to as “Traps” (Training Repayment Agreement Provisions), unfairly prevented individuals from seeking other employment due to fear of having to reimburse the employer for the training costs. 

So, based on that concern, the Colorado legislature passed, and Governor Polis signed, the aforementioned Attorney General Restrictive Employment Agreement bill. Prior to these efforts, Colorado law required that the training was distinct from on-the-job training, that the costs were reasonable, and, as mentioned above, the amount of the repayment decreased over time, which could not exceed two years. Now, with the passage of this bill, the following requirements have been added: 

• The agreements are deemed to be a “consumer credit sale” under Colorado Consumer Credit Code and, accordingly, organizations may be required to register the agreements with the State of Colorado, like a student loan. 
• Colorado’s Attorney General may develop rules regarding such agreements and the Attorney General may seek to recover damages from an employer that requires an employee to enter into an agreement that is not enforceable. 

Accordingly, before rushing off to create the agreement requested by the manager, make sure that you review this new law, all its requirements, and any regulations issued by the Attorney General. 

Questions? Email info@coshrm.org