Why It's a Dumb Idea for Tech Companies to Charge Departing Employees for Training

David Linthicum

I just got a call from an old mentee of mine. It seems that they are being charged for their certification training after leaving a well-known tech company. This is training that they really did not want to take in the first place and was too rudimentary to be useful to them.? Indeed, there was better training available that was completely free. ?But, still, the shunned ex-employers want their couple thousand dollars back. This is a hugely stupid idea by the tech companies out there; here’s why.

In an era of rapid technological evolution, the demand for skilled workers in the tech industry has never been higher. To stay competitive, tech companies have a vested interest in ensuring their employees are well-trained and up to date-with the latest technologies and practices.

However, a recent trend has emerged where tech companies start charging departing employees for the cost of their training. This practice, commonly referred to as Training Repayment Agreement Provisions (TRAPs), might seem like a practical financial decision on paper, but it's fundamentally flawed and could be detrimental to that company.

Tech companies are shooting themselves in the foot.

Firstly, the idea of recouping training expenses from departing employees might look good on a balance sheet initially, but it's a short-sighted strategy. Training staff is an investment in the company’s future and part of the cost of doing successful business. Charging employees who leave early sends a chilling signal to potential talent: the cost of leaving might be too great. This could dissuade brilliant minds from joining such organizations, potentially stifling the flow of talent and innovation—a pillar upon which tech companies thrive.

Moreover, instituting TRAPs can poison company culture and morale. For many, it instills a feeling of "being trapped," compelling employees to stay out of financial compulsion rather than job satisfaction or loyalty. Such a mindset can degrade work environments and lead to a workforce that's engaged not by motivation, but by fear of financial reprisal. In a field as innovative as technology, where creativity must be nurtured, such an atmosphere can decrease overall productivity and innovation.

From a legal standpoint, TRAPs exist in a murky area. While they may be crafted to comply with employment laws, they often push the boundaries of what's considered ethical in workplace relationships. Regulatory bodies, such as the Consumer Financial Protection Bureau, have begun to scrutinize these practices more closely, indicating potential future crackdowns. Tech companies could find themselves embroiled in legal challenges that may arise from disgruntled former employees claiming unjust financial burdens.

Future employees are watching you.

One significant impact of this practice is the swift dissemination of information. When employees post about their experiences with TRAPs, it can quickly alert a wide network of colleagues, industry professionals, and potential job seekers about which companies enforce these policies. This transparency not only helps professionals make informed decisions about where they might want to work but also puts a spotlight on company practices that could be viewed as unfavorable. The viral nature of social media means that a single post about unfair employment practices can reach thousands, potentially leading to a broader discussion or even public backlash against the company in question.

This use of social media as a vetting tool by employees can lead to greater corporate accountability. Companies might face public relations issues or damage to their employer brand if they are publicly identified as aggressively pursuing reimbursement for training costs from departing employees. In response, companies might be pushed to reevaluate such policies, especially if they find themselves losing talented candidates who are deterred by the prospect of potential financial liabilities upon leaving.

For example, a recruiter contacted me irate that I counseled a job candidate not to take employment with them because these TRAP agreements were often used, based on feedback I got from many other mentees who departed that company. ?At the end of the heated conversation, she understood that this practice put the company in a negative light, even though I get that spending thousands of dollars for a specific cloud certification and then having that employee find another gig was a negative outcome for them. ??

However, it was also a negative outcome, having their recruiting and hiring costs spike up due to them having a bad rep in the cloud engineering community, who are avid sharers of information.?? My advice is to work on keeping your employees in place through good leadership and fair compensation; if that’s in place, they won’t move on to greener pasters, trust me. ??What does not seem fair to the company, is often the right thing to do.

Thus, social media's role in sharing information about TRAPs underscores a broader movement towards transparency in employment practices. It empowers employees and job seekers to make choices based on a fuller understanding of the potential financial implications of joining or leaving a company. In turn, this may press companies to adopt more fair and attractive employment practices, fostering a more equitable professional environment overall.

While each jurisdiction, including specific countries, has different laws and regulations around TRAPs, in the US, judges don’t seem to like them and often rule in favor of the employee.? Indeed, it’s a well-understood strategy to call their bluff, and in many cases, you will hear nothing more from them.??? This is given that the cost of litigation is far more than any benefit they will receive.??? I’m not a lawyer, so please seek your own legal advice for your specific situation.???

The core issue is self-reflection for tech execs.

Instead of using training repayment agreements to lock employees down, tech companies should focus on why employees leave and address these core issues. Better working conditions, competitive salaries, clear paths for advancement, and a healthy work environment are more effective in employee retention than any financial handcuffs could be. Investing in employees' professional growth without the strings attached also fosters loyalty and a positive reputation in the industry, attracting more skilled workers.

Charging departing employees for training reflects a tactical misstep in the strategic management of human resources within the tech sector. It may also signal deeper problems within a company, including under-compensation or poor working conditions. Smart tech leaders should think long-term; they should not only invest in their employees' growth unconditionally but also create environments that encourage longevity and reward loyalty. True innovation thrives in freedom, not in financial constraints. By removing TRAPs and focusing on nurturing talent, tech companies can ensure they remain at the forefront of innovation and maintain their competitive edge in a fast-paced industry.

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