Can you Deduct Training Costs from Employee’s Salary?

Following the termination of an employee’s employment contract, employers often ask whether they can unilaterally deduct training or professional development costs from the final payment due to the employee. Recently, the Supreme Court of Lithuania (“Court”) has clarified the issue of reimbursement of training and professional development expenses.

ECOVIS ProventusLaw’s labour law experts remind us that the Labour Code allows the parties to agree on the terms and conditions of the reimbursement of the employer’s costs for the employee’s training or professional development when the employment contract is terminated at the employer’s initiative due to the fault of the employee, or at the employee’s initiative, without valid reasons. The main purpose of such a regulation is that the employer may recover part of the costs incurred for the employee’s training if the employee does not continue the employment relationship through the fault of the employee or for no good reason and does not reimburse the employer for the costs incurred by work.

If the employee does not voluntarily agree to reimburse these costs, it is necessary to assess whether the employer can unilaterally deduct the costs from the employee’s salary.

This is precisely the situation examined by the Court in its ruling of 27 November this year.

The Court has established that the Labour Code imperatively sets out a definitive list of cases when unilateral deductions may be made from an employee’s salary, and such list does not include the case of training or professional development expenses. Therefore, the general rule is that an employer may not agree with an employee on a unilateral deduction to recover the cost of the employee’s further training.

However, the Labour Code provides for the possibility to derogate from this general rule. It states that if the following conditions are met, the parties may agree on a unilateral deduction:

  • the salary stipulated in the employment contract is at least two times the gross average monthly salary in the national economy, as published by the Lithuanian Department of Statistics;
  • there is no agreement on exceptions to labour law rules governing maximum working time and minimum rest periods, the conclusion and termination of employment contracts, minimum salaries, safety and health, gender equality and non-discrimination on other grounds;
  • there is a balance between the interests of the employee and those of the employer.

The first two conditions are more of a question of fact. In contrast, as far as the balance of interests between the employee and the employer is concerned (the third condition), the Court held that the agreement on training and professional development costs met this condition because the parties had agreed:

a) on a period that is not the total amount of time allowed by the Labour Code for which costs can be reimbursed (one year was agreed, whereas the Labour Code allows for two years),

b) the parties agreed to reimburse only a part of the employer’s costs in proportion to the time not worked in one year.

In conclusion, the Court held that the parties could derogate from the general rule that no unilateral deduction could be made regarding reimbursement of training costs and could agree that the employer would make the deduction unilaterally.

However, according to the Court, not all training and professional development courses are automatically covered by the provision of the Labour Code on the reimbursement of training costs. The obligation on the employee to reimburse the employer for the training costs incurred by the employer should arise only where, in the course of the training, the employee acquires knowledge that is not directly necessary for the performance of his or her job functions, that is to say, where the employee, who is still suitable for the performance of the functions assigned to him or her even without the training or professional development, acquires additional knowledge or skills which go beyond the requirements of his or her job and which add value to the employee in the labour market.

In the light of the above court interpretations, ECOVIS ProventusLaw proposes to review the agreements on the reimbursement of training and professional development expenses and the provisions on the possibility and legality of unilateral deductions.

Prepared by ECOVIS ProventusLaw Head of Employment Practice Brigida Bacienė

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