Answer: Maybe, but use caution. First, we advise that you check your state laws on payroll deductions. Most states don’t allow payroll deductions under these circumstances, so it’s unlikely you’ll be able to recoup your costs by deducting money from a departing employee’s final paycheck. See our Legal Guide, “Payroll Deductions,” for information on this first course of action. Second, check your state law on kickbacks to employers. To avoid payroll deduction complications, you could require the employee to write you a check. However, it’s possible that this type of reimbursement could be considered a prohibited kickback on wages. Third, evaluate whether requiring the reimbursement for the training would cause the employee’s pay to drop below minimum wage for that pay period. You need to ensure that doesn’t happen, remaining compliant with your state’s minimum wage laws.
Finally, consider whether the employee is properly classified as a salaried exempt employee. In order for salaried workers to be exempt from overtime, one of the requirements is that their salaries generally cannot be reduced due to variations in quantity or quality of work. Recently a federal district court in North Carolina ruled that requiring salaried exempt workers to repay the costs of a training program if they left employment within five years could indicate the workers were actually nonexempt. The reason? The policy effectively meant that the salary could be reduced due to variations in the quantity of work (i.e. length of employment). The employees, therefore, could be entitled to overtime pay for all hours worked over 40 during the period of time they were subject to the policy (Ketner v. Branch Banking and Trust Co., MD NC, Oct. 2015). See our Legal Guide, “Salary Basis Test for Overtime Exemptions,” for more information on employee overtime exemptions. As you can see, the answer to this question isn’t simple, so if you’re contemplating a reimbursement requirement, contact your Vigilant employment attorney before moving forward, ensuring that you avoid violating any wage and hour laws.
This website presents general information in nontechnical language. This information is not legal advice. Before applying this information to a specific management decision, consult legal counsel.