Payback of Tuition Reimbursement
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We recently took over the collection of tuition reimbursement for employees who have voluntarily left the company.
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Upon entering our tuition reimbursement program, all employees sign a contract stating that if they terminate their employment for any reason they will payback all reimbursements within the twenty-four month period preceding their date of termination.
Wondering how other Companies go about collecting this money? At some point, if the money is not paid back, do you send it out to a collection agency? Any suggestions would be appreciated.
Thanks.
Comments
We've just been discussing this issue on another BB I am on. This is a very sticky issue and I know many DOL/IRS gurus who stand by the fact that if you didn't treat it as a loan with forgiving payments as they accrued that you will have a very hard time legally collecting it once an employee leaves the company. It will all depend on how that contract is written. The contract can NOT supersede FLSA. And employee can NOT sign away their FLSA rights to MW/OT or exempt weekly minimum amounts.
"The FLSA is the Federal law of most general application concerning wages and hours of work. This law requires that all covered and nonexempt employees be paid not less than the minimum wage for all hours worked and overtime pay for all hours worked over 40 in a workweek. Hours worked under the FLSA include required basic training time, such as the training hours in this case. See 29 CFR sections 785.27 through 785.32 and section 553.226 (copies enclosed).
Wages cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear”. The wage requirements of the FLSA will not be met where the employee “kicks-back” directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee, if such payments bring the employee’s pay below the required minimum wage or overtime levels. See Section 531.35 of the enclosed 29 CFR Part 531.
The United States Supreme Court has held that an employee may not waive his or her rights to compensation due under the FLSA. Brooklyn Savings Bank v. O’Neil, 328 U.S. 697 (1945). Similarly, in Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (198l), the Supreme Court held that a labor organization may not negotiate a provision that waives employees’ statutory rights under the FLSA. Consequently, the return from the employee to the employer of compensation due an employee pursuant to the FLSA minimum wage and/or overtime requirements would violate the statute.
It is thus our opinion that any reimbursement paid by the officer that will result in payment of less than the amount required by the applicable minimum wage and/or overtime requirements will violate the “free and clear” provisions of the FLSA. See opinion letters dated October 21, 1992 and September 30, 1999; Heder v. City of Two Rivers, 295 F.3d 777 (7th Cir. 2002). Because the FLSA establishes a floor for required compensation, state or local laws may require greater amounts but, pursuant to the Supremacy Clause, may not diminish the protections of the Act. See 29 U.S.C. § 218 (a); U.S. Constitution, Art. VI, Cl. 2.
Partial quote from http://www.dol.gov/esa/whd/opinion/FLSA/2005/2005_05_31_18_FLSA_Reimbursement.htm
Based on this knowledge, you would have to make sure the amount you are wanting reimbursement on is "free and clear" of the MW/OT requirement amounts. You would have to take total wages and subtract out the required amounts to make sure that you have enough to try to recoup.
The only other thing I have seen legally done is if these reimbursements were NOT taxable wages at the time, then you could 1099 the amount still owed as taxable income to the employee.
I agree with HRforMe. I have spoken with a couple of attorneys and tax professionals who say that most of these contracts will not hold up in court. One of these individuals suggested a way to word the contract similar to what HRforMe was talking about, but it was so confusing to me that I knew I was never going to be able to explain the contract for others to understand. Fortunately we have not had a situation that required us to try to collect on the money that the company had spent.