Training Repayment Clause: Retention Period, Costs & 2025 Case Law

I. Introduction

Employers and employees alike have an interest in completing training and continuing education. Training measures usually generate significant costs, e.g., in the form of tuition fees, accommodation and catering expenses, and travel costs. For the employer, labor costs are also added if the training takes place during regular working hours and the employee is released with pay.

The details of the training are regularly agreed upon by the parties to the employment contract in so-called training agreements. Usually, the employee on the one hand undertakes to participate in the training. The employer, on the other hand, guarantees to cover the training costs and often also paid release from the obligation to work.

Because of the employer's investment, the employer has an interest in the long-term retention of their trained employee. They want to secure their services as long-term as possible. Therefore, the employee regularly undertakes contractually to continue the employment relationship for a certain minimum period after the training (retention period). And in the event that the employee leaves the employment relationship before this retention period expires, they undertake to (proportionally) repay the training costs (repayment obligation).

The employee is bound to the employment relationship by this clause. If they leave the company prematurely, they must repay training costs proportionally. Their freedom to choose and change their profession freely is thereby effectively restricted. Because Article 12 of the German Basic Law protects this freedom of occupation, this restriction must not be unreasonable contrary to the requirements of good faith. This must be taken into account when designing the training agreement with a repayment clause.

II. Admissibility of Repayment Clauses

The admissibility of such repayment clauses is subject to strict control by case law. The high requirements have recently steadily tightened. Repayment clauses that do not meet these requirements are invalid. In particular, if repayment clauses are agreed in a standard form contract, the so-called prohibition of validity-preserving reduction applies. Every error can mean the invalidity of the entire clause. Employers then cannot claim any cost replacement even if the employee leaves within the retention period.

Examination Standard

The examination of the admissibility of a training contract with a repayment clause takes place in two stages.

1. Legitimate Interest

At the first stage, it must first be assumed that the employer has any legitimate interest in the retention of the employee at all.

A legitimate interest in the retention of the employee arises if the employer makes a certain investment in the training of their employee that allows them to reasonably rely on the fact that they can use the employee's qualification for a certain period.

This is the case, for example, if they already undertake to cover the training costs before the training measure is completed and / or they release the employee from an existing obligation to work with continued payment of the contractually agreed remuneration for the duration of the training. Here, the employer assumes the risk of a bad investment.

In contrast, there is no legitimate interest, e.g., if the employee finances the costs of the educational measure themselves (initially) and is only released from their obligation to work without pay during the time of the educational measure or if they acquired the qualification in their free time. For then the employee acquires the qualification at their own expense. They alone assume the risk of a bad investment; the employer assumes no investment risk.

2. Reasonableness of a Repayment Obligation

If a legitimate interest exists, the clause must also be reasonable at the second stage. At its core, the admissibility of a repayment clause is to be judged according to a proportionate weighing of the conflicting interests of the employer versus those of the employee:

• The employer has an interest in the longest possible use of the qualification acquired by the employee.
• The employee has an interest in choosing their profession freely and without ties.
• These conflicting interests of the parties to the employment contract must be brought into a reasonable relationship transparently. Possible disadvantages for the employee must be offset by adequate compensation.

a. Adequate Compensation

An adequate compensation exists opposite the retention if the employee receives an adequate consideration for the repayment obligation through the training measure. The educational measure must offer them a monetary advantage that they can use profitably for themselves on the labor market. This is the case if their labor market opportunities increase due to the training.

There is no adequate compensation if the employer is already legally obliged to train the employee or specific training advantages can only be used in the employer's business or the training serves the adjustment to new internal requirements.

b. Transparency of the Repayment Clause

The repayment clause must be designed with sufficient transparency. This applies in particular if the selected training agreement was pre-formulated for a variety of application cases. For even from the statutory regulation of Section 307 para. 1 sentence 2 of the German Civil Code (BGB), it follows that an unreasonable disadvantage can result from the provision not being clear and understandable.

It must be clear to the employee what they are getting into. The scope of their repayment obligation must be determined. They must be able to estimate their repayment risk and recognize which costs they specifically have to reimburse.

To this end, at least the type and calculation bases of the costs to be reimbursed must be stated. It is not enough to state, for example, "all expenses incurred by the further training including continued payment of wages." Rather, the exact and final designation and quantification of the individual positions from which the repayment amount is to be composed is required.

If individual cost items cannot yet be finally quantified when the training agreement is concluded, this must be pointed out. These must be named and at least quantified with a probable amount. After the training measure is completed, the employee must then be informed finally of the specific costs incurred.

The training agreement must be concluded before the start of the training or further education measure. If a repayment agreement is only concluded after the start of the further education, this circumstance alone regularly leads to the invalidity of such an agreement. For the employee then does not know before the start of the further education what they might be facing.

c. Retention Period

Often, repayment clauses are invalid because of excessively long retention periods. The retention period must be in a reasonable relationship to the training and the associated monetary advantage for the employee.

The reasonableness of the retention period is primarily judged according to the duration of the training, the amount of the employer's expenditure, the times of paid release, and the extent of the advantages flowing to the employee. For assessing the duration of the training, the number of working days on which the employee is released from their obligation to work with continued pay is decisive. Case law has developed guiding values for this:

• In the case of a training duration of up to one month, the retention period can be up to six months.
• If the training duration covers a period up to two months, the retention period can be up to 12 months.
• In the case of a three- to four-month training duration, case law considers a retention period of up to 24 months to be reasonable.
• A retention period of up to 36 months is regarded as reasonable if the training duration is six to 12 months.
• Finally, for a training duration of more than 24 months, the maximum retention period is 60 months.
• A proportionately long retention can also be justified in individual cases with shorter training if the employer expends very significant funds or participation in the training brings above-average advantages for the employee.
• The statutory maximum in any case is five years (Section 624 BGB).

However, the reasonable retention period is determined by the individual case. For particularly costly qualification measures, longer retention periods may be reasonable; e.g., pilot training with costs over EUR 100,000.

d. Reason for Repayment

The obligation to repay training costs must not be linked simply to leaving due to an employee's resignation within the agreed retention period. A repayment clause must exclude cases in which the employer has no legitimate interest in continuing the employment relationship. Thus, a distinction must be made according to the inner reason for the premature leaving.

A repayment agreement may only cover cases in which the leaving is founded solely in the sphere or area of responsibility of the employee. The clause must expressly exclude other reasons that are attributable to the employer's risk sphere.

This concerns in particular terminations by the employer that are not based on conduct of the employee in breach of contract, above all operational redundancies.

However, it cannot be distinguished solely according to whether there is an employer or employee termination. Even justified resignations by the employee must not lead to a repayment obligation if the reason for the termination originates at least also in the sphere or area of responsibility of the employer.

According to recently tightened case law of the German BAG, a repayment obligation is also unreasonably disadvantageous if it provides for a repayment obligation as a result of the employee's resignation before the end of the retention period even if the employee is permanently unable to perform their contractually owed work through no fault of their own. The risk of permanent incapacity to perform is attributable to the employer's entrepreneurial risk.

e. Pro-rata Reduction of the Repayment Obligation

The employee must also be able to influence the repayment obligation through company loyalty. The recognized interest in retention of the employer reduces by way of partial amortization the longer the employee works for the employer after the training.

Therefore, the amount of the repayment obligation must decrease proportionally over time during the retention period. The reduction can take place in annual, quarterly, or monthly periods, with pro-rata reduction in monthly steps being preferable because it reflects the interest situation most legally securely.

If the agreed retention period is six months after the completion of the educational measure, the amount of the repayment obligation for each month of service after the completion of the training should, for example, reduce by 1/6.

f. Further Repayment Reasons

Failure to pass the examination, non-participation in the examination, or termination of the measure, or leaving the employment relationship before completing the training measure can also be considered as repayment reasons.

The admissibility of such repayment reasons has not yet been finally clarified by the highest courts. Analogously, the aforementioned requirements must in any case be met. That is, here too there must be a legitimate interest in the retention of the employee. The repayment clause must be reasonably designed. For this, the repayment obligations must in any case be limited to the training costs already incurred. The reason for repayment must also be limited here to those that fall within the sole responsibility and risk area of the employee. According to the decision of the BAG of April 25, 2023, 9 AZR 187/22, for example, a distinction must be made as to why the employee did not participate in the examination.

III. Legal Tips

Training agreements with repayment clauses should be formulated by a specialist lawyer for labor law to meet the high requirements.

In any case, they should be concluded in writing and before the start of the training measure. A signed copy should be given to the employee for documentation purposes.

The purpose of the training, the duration of the training, and the specific training costs should be named and quantified as specifically as possible in the training agreement.

The retention period must be reasonable, observing the guide values developed by case law.

The repayment clause should definitively formulate in which cases a repayment obligation is to occur. Only such reasons for termination may lead to a repayment obligation that are exclusively attributable to the sphere and area of responsibility of the employee.

The amount of the repayment obligation should reduce pro-rata monthly in relation to the agreed retention period after the end of the training measure.

Existing contract templates for training agreements should be checked regularly for up-to-dateness, as case law is constantly evolving.