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Culture War Roundup for the week of December 30, 2024

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Theoretically legal? Yes. Practical? No, not really. You might as well put a sign out front that says "This place has high turnover. It sucks to work here and you could easily make more elsewhere." In a tight labor market all that's going to get you is people who need a job so badly that they couldn't imagine just leaving after a year anyway. In a tight job market it's probably not necessary in any event.

From a legal perspective, if I'm a company looking to hire someone subject to one of these, I'm considering two options:

  1. Hire the person and assume the old company won't enforce the agreement. This is the easiest thing to do, though it leaves open a lot of uncertainty. But agreements don't enforce themselves, and it's going to cost the old company a lot of money to try to win this in court.

  2. Offer the old company a couple hundred bucks to sign a release and threaten to sue for declarative judgment that the agreement is unenforceable if they refuse.

This is the more aggressive strategy, but it throws down the gauntlet early. It says "we don't think this is enforceable and we dare you to enforce it". I could argue unenforceability on a number of theories. Now, if the old company paid a third party vendor for classes or other training, I'd probably just pay up, but if they're trying to say the employee owes them ten grand for normal internal training then I'd argue that the clawback provision is intended as an illegal penalty clause to prevent the employee from leaving the company. The idea being that the training is given to me in consideration of remaining at the company for a certain period, and that by leaving the company I breached the contract and have to pay damages. Except the company can't prove damages to an amount certain, so in anticipation of this the parties have agreed upon damages at the formation stage.

The problem with this is that legitimate liquidated damages clauses have to be based on a reasonable approximation of actual damages, in this case, a reasonable approximation of training costs. Doing this requires putting all kinds of fun stuff out there like training guidelines, salaries of employees, estimates of how much the company is making per employee, etc. Of course, I'm requesting all of this stuff in discovery, and they can fight me over it if they want. An that's only one of the theories I'd put forth. Just giving it up is probably the easier option.

if the old company paid a third party vendor for classes or other training

This is almost always the case. Or, as @phailyoor mentioned, continuing education/advanced degrees. They're often doing things like tuition reimbursement programs.

This definitely creates some messed up incentives, because if you can, say, "partner" with a separate training company who is really just doing the stuff you'd be otherwise doing, then you can implement clawbacks for things you couldn't otherwise. Might cost a bit more up front, but you might be able to make it back on the employee retention. And I'm sure some big companies would be happy to set up basically fake "separate" training companies that aren't really separate and dare you to try to prove it.