Location: California, USA

My friend is resigning as an employee of a large corporation. During his time there, he used the company's tuition assistance benefit program which covered the cost of obtaining an M.S. degree at a local university. Before enrolling in the program he signed an agreement that includes this wording:

In recognition of the financial commitment that XYZ is making towards the employee's education, the employee agrees to stay employed at XYZ for a minimum of two years after his/her coursework is taken or completed. If the employee should voluntarily leave prior to the end of this 24-month period or while still working on the degree, the employee will reimburse XYZ for all costs associated with this degree program.

Further, there is no verbiage outlining consequences should the employee fail to pay this assistance money back.

The agreement does not say anything about withholding wages from paychecks and I have read that in CA it is illegal to do so without employee consent anyway.

Does anybody know if either federal or state law prevent this type of agreement to be enforced? Anybody with experience either way on this type of agreement?

  • Why on earth would it be unenforceable just because he's not being paid more money? This is an entirely legal contract and your friend will be lucky to get a last paycheque at all, if the costs are greater than that amount.
    – Nij
    Aug 16 '17 at 1:35
  • @Nij It's generally illegal to withhold a debt from a paycheck without a garnishee order. Reimbursement of tuition fees paid by an employer on an employees behalf cannot be taken into account in calculating wages or salary. They would have to make the payment then demand reimbursement- during if necessary.
    – Dale M
    Aug 16 '17 at 2:59
  • If these debts are part of an agreed payment, they can be withheld directly. See for example here. I doubt firmly your claim that the converse is generally true, as this is also the rule in my home jurisdiction. If the agreement says that the employer may deduct from wages, that is what happens.
    – Nij
    Aug 16 '17 at 5:59
  • @Nij Yes. In California it is illegal to garnish wages in that manner. So my question is whether there are any state protections for employer-paid educational assistance received during employment. Specifically, for training that is directly related to the job function. In addition, from a practical standpoint, is this kind of clawback something that a large company would actually pursue?
    – Daniel V
    Aug 16 '17 at 6:39
  • Find out whether California has the same exceptions in law as e.g. Arizona does. Then consult a lawyer to see if your friend falls into one of them. It's the kind of thing any company is likely to pursue, if only out of habit or principle.
    – Nij
    Aug 16 '17 at 6:40

If the employee triggers this clause with their resignation they will owe the value of the tuition fees paid as a debt to their employer. The employer can seek enforcement through any of the normal methods including suing in a court of competent jurisdiction.

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