Are You Underestimating the Value of Employee Training? Implications for Training Repayment Agreements

Many employers use Training Repayment Agreements (TRAs) to protect their investment in employee development.

The premise is straightforward: if the employer pays for training and the employee leaves shortly afterward, the employee may be required to repay some or all of the cost.

But what if the value of training is being underestimated in the first place?

A recent Harvard Business Review article discussed research showing that employee training delivers more than improved individual productivity. It also increases managerial productivity.

When employees are better trained, they require less supervision, fewer corrections, and less hands-on support. That frees up managers to focus on higher-value work.

The striking part of the study was the number: increased managerial productivity accounted for nearly 45% of the total benefits of the training program.

In other words, traditional return-on-investment calculations may significantly undervalue training.

That raises important legal questions for employers who rely on TRAs.

Why This Matters for TRA Enforceability

Courts assess the enforceability of TRAs based on reasonableness.

If a repayment clause is challenged, a court may examine:

• Whether the repayment period is reasonable
• Whether the amount represents a genuine estimate of loss
• Whether the agreement functions as a penalty

If employers are undervaluing the benefits they receive from training (particularly the managerial productivity gains) that could affect how reasonable a repayment clause appears.

For example:

1. The Amortization Period

Many TRAs require repayment if employment ends within a set time frame (e.g. 12 or 24 months). The repayment amount typically decreases over time.

If an employee can show that the employer effectively recouped its training investment earlier than anticipated because of increased productivity at both the employee and managerial levels, a longer “debt retirement” period may be harder to justify.

Reasonableness is context-specific. But the more quickly an employer realizes the benefit of its investment, the more scrutiny that timeline may attract.

2. Pre-Estimated Damages

Some TRAs rely on a pre-estimate of damages rather than itemizing specific costs. This is common where it is difficult to calculate precise losses flowing from early departure.

However, courts distinguish between a genuine pre-estimate of damages and a penalty.

If employers are assuming that their losses are limited to tuition, materials, or direct costs, without accounting for internal productivity gains already realized, the repayment figure may overstate the actual loss.

An overstated amount increases the risk that the clause could be characterized as punitive.

A Practical Complication: Proving Productivity Gains

Of course, there is a separate evidentiary challenge.

The study referenced in the HBR article does not provide a universal formula for calculating managerial productivity gains. It also acknowledged that the findings were influenced by the specific workplace studied, including low turnover and limited hiring flexibility.

Not every organization will experience identical results.

But the broader point remains: training has indirect benefits that are often overlooked in ROI calculations.

When repayment obligations are tied to “loss,” those indirect gains may matter.

A Reminder of Core Legal Principles Governing TRAs

Employers using TRAs should ensure they are aligned with established legal principles.

Some key considerations include:

1. Voluntariness

‍Employees should not be compelled to enter into the training or the TRA.

2. Transferability‍

The training should provide skills that are transferable beyond the employer’s workplace. Courts are more skeptical where the training consists primarily of firm-specific knowledge.

3. Precision

‍The agreement should clearly specify:

• What expenses are repayable
• The formula used to calculate repayment
• Or a fair pre-estimate of damages

Vague clauses increase enforcement risk. Employers must also ensure compliance with employment standards requirements relating to wage deductions and final pay.

4. Amortization

‍Repayment obligations should decline over time. The structure should reflect the employer’s diminishing loss as the employee continues working and the benefits of training are realized.

A flat repayment amount, regardless of when employment ends, is more vulnerable to challenge.

Beyond Compliance: A Governance Perspective

Training is often framed as a cost to be recouped, but the research highlights a broader truth: training is an investment in institutional capacity.

It can reduce supervision burdens, improve decision-making quality, and strengthen operational resilience.

When employers structure TRAs, they should do so with a clear understanding of the full value they are receiving, not just the invoice for the course.

Overly aggressive repayment terms may create legal risk and employee relations strain. Carefully structured agreements, grounded in realistic assessments of benefit and loss, are more likely to withstand scrutiny. As with many employment law issues, precision and proportionality matter.

Reviewing Your Training Repayment Agreements

If your organization uses TRAs or is considering implementing them, this may be a good time to revisit the assumptions underlying those agreements.

Are repayment timelines proportionate to the actual benefits realized?
Is the amount structured as a genuine estimate of loss?
Is the agreement drafted with sufficient precision to withstand scrutiny?

Small drafting choices can have significant consequences if an agreement is later challenged.

If you would like support reviewing or updating your TRAs, or assessing the broader legal risk in your training strategy, you’re welcome to reach out through the contact form. I would be pleased to discuss how I can assist.

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