NSW Clawback Study Fees/StudySupport

[Hammerman3]

Hi, I have a question about clawback provisions in an employment contract.

Within the "Remuneration" clause, the following is contained:
"In addition to the above, your total remuneration package will also comprise the following to be paid for by the company on your behalf:

• Course fees for you to complete the Institute of Chartered Accountants Program (Study Support); and
• Annual Membership fee to the Institute of Chartered Accountants

The above items could vary from year to year and are subject to the Company's internal policies and discussions with you.

An annual salary review will be undertaken with the Company and we will apply our policy based on performance and other matters we consider relevant."

So it is quite clear course fees are part of the remuneration and there is no specific Clawback clause, nor is there a specific clause for Study Support, but there is a clause on Study Leave, and contained within that clause is the following wording:
"If you resign or are terminated from your employment with the Company or discontinue study of an external qualification, the company may seek reimbursement for any study leave or study support provided during the 12 month period prior to you leaving the Company or discontinuing study."

I understand the concept, the person is moving on so theoretically the company won't get the value or return on investment from paying the course fees. But the person has proved to be a valuable employee, which has been recognised by both the company and clients, and in doing so they have often worked what would be deemed unreasonable additional hours, in excess of the standard 38 hrs. So the $9k clawback is a real kick in the face.

Additionally, the person was advised that the fees were part of their remuneration and never advised of any clawback provisions until receiving an invoice for the fees after giving notice.

The person will try to negotiate with the employer over the clawback amount but my question is:
Is it ok for there to be no specific Clawback clause, nor a specific clause for Study Support but for the clawback provision to be what I consider "hidden" in the Study Leave clause?

 

[Tim W]

First things first - is this money part of your assessable income under 8-1?
That is - part of your taxable income? Does it appear on your Payment Summary?

Because if not, then maybe it's not remuneration after all.
Maybe, it's actually an Expense Payment Fringe Benefit.
I'll bet that they have not declared it to the ATO as one of those.
Hold that thought as you enter negotiations....

 

[Rod]

Is it ok for there to be no specific Clawback clause, nor a specific clause for Study Support but for the clawback provision to be what I consider "hidden" in the Study Leave clause?

Not the correct question to ask.

Claw backs are possible, but not as an automatic right in most situations (ie employer cannot deduct claw backs from your final pay without your agreement). In your situation you have an argument that the "Chartered Accountants Program (Study Support)" is remuneration and not subject to any claw back however other study support can be clawed back.

 

[Hammerman3]

Hi, I have a question about clawback provisions in an employment contract.

Within the "Remuneration" clause, the following is contained:
"In addition to the above, your total remuneration package will also comprise the following to be paid for by the company on your behalf:

• Course fees for you to complete the Institute of Chartered Accountants Program (Study Support); and
• Annual Membership fee to the Institute of Chartered Accountants

The above items could vary from year to year and are subject to the Company's internal policies and discussions with you.

An annual salary review will be undertaken with the Company and we will apply our policy based on performance and other matters we consider relevant."

So it is quite clear course fees are part of the remuneration and there is no specific Clawback clause, nor is there a specific clause for Study Support, but there is a clause on Study Leave, and contained within that clause is the following wording:
"If you resign or are terminated from your employment with the Company or discontinue study of an external qualification, the company may seek reimbursement for any study leave or study support provided during the 12 month period prior to you leaving the Company or discontinuing study."

I understand the concept, the person is moving on so theoretically the company won't get the value or return on investment from paying the course fees. But the person has proved to be a valuable employee, which has been recognised by both the company and clients, and in doing so they have often worked what would be deemed unreasonable additional hours, in excess of the standard 38 hrs. So the $9k clawback is a real kick in the face.

Additionally, the person was advised that the fees were part of their remuneration and never advised of any clawback provisions until receiving an invoice for the fees after giving notice.

The person will try to negotiate with the employer over the clawback amount but my question is:
Is it ok for there to be no specific Clawback clause, nor a specific clause for Study Support but for the clawback provision to be what I consider "hidden" in the Study Leave clause?

Thanks Tim for your reply. Although course fees are included under the remuneration clause in the contract, it is not part of their taxable income and doesn't appear in the Payment Summary. There is no FBT applicable as items satisfy the "otherwise deductible" rule.

 

[Hammerman3]

Not the correct question to ask.

Claw backs are possible, but not as an automatic right in most situations (ie employer cannot deduct claw backs from your final pay without your agreement). In your situation you have an argument that the "Chartered Accountants Program (Study Support)" is remuneration and not subject to any claw back however other study support can be clawed back.

Hi Rod, thanks for your response. I imagine the signed employment contract implies the employee's agreement. I agree there is an argument the "Chartered Accountants Program (Study Support)" is remuneration as that is how it is specified in the contract but it didn't form part of their taxable income and doesn't appear on their Payment Summary. As mentioned in my reply to Tim W, there is no FBT applicable as items satisfy the "otherwise deductible" rule. Also, I should have been clearer, I wrote "never advised of any clawback provisions until receiving an invoice...", whereas I should have written the clawback provision was never mentioned when discussing their remuneration and contract.

In my eyes the wording in the contract is ambiguous, either the result of poorly constructed or possibly deliberately misleading, hence my question - Is it ok for there to be no specific Clawback clause, nor a specific clause for Study Support but for the clawback provision to be what I consider "hidden" in the Study Leave clause?

 

[Paul Cott]

Hi, I cannot comment on Tim's comments on tax, but looking at this issue purely from an employment law perspective, such clauses to claw back are common. I refer to this clause allowing clawbacks in my view;- If you resign or are terminated from your employment with the Company or discontinue study of an external qualification, the company may seek reimbursement for any study leave or study support provided during the 12 month period prior to you leaving the Company or discontinuing study." So if they choose to seek reimbursement, it seems the clause (if I understand you correctly) is a clawback provision. I have advised quite a few times on such clauses in employment agreements and they do not fall foul of section 324 of the Fair Work Act as the employee by getting the study, is getting a benefit.

 

[Tim W]

Hi, I cannot comment on Tim's comments on tax, but looking at this issue purely from an employment law perspective, such clauses to claw back are common. I refer to this clause allowing clawbacks in my view;- If you resign or are terminated from your employment with the Company or discontinue study of an external qualification, the company may seek reimbursement for any study leave or study support provided during the 12 month period prior to you leaving the Company or discontinuing study." So if they choose to seek reimbursement, it seems the clause (if I understand you correctly) is a clawback provision. I have advised quite a few times on such clauses in employment agreements and they do not fall foul of section 324 of the Fair Work Act as the employee by getting the study, is getting a benefit.

What is your view, @Paul Cott, on the need for them to be express (or at least, necessarily implicable)
in order for them to be enforceable?

 

[Tim W]

Not sure that I agree that

...there is no specific Clawback clause....

From where I sit,

"If you resign or are terminated from your employment with the Company or discontinue study of an external qualification, the company may seek reimbursement for any study leave or study support provided during the 12 month period prior to you leaving the Company or discontinuing study."

is a pretty good example of a clawback clause...?

Also, I do not agree that entry level training - such as de novo training in a particular field or line of work,
such as training someone from scratch to become an accountant, is always and automatically an otherwise-deductible.

 

[Paul Cott]

What is your view, @Paul Cott, on the need for them to be express (or at least, necessarily implicable)
in order for them to be enforceable?

It is express.

 

[Rod]

...but also needs to be particularised as to amount else it does fall foul of s.324(2)(a) FWA.

The common issue is whether the employer can unilaterally withhold wages based on a generic claw-back clause. In most case the answer is no. However the employer would likely have a contractual claim to the money, just not be able to use it as a 'set-off' against wages.