# Regulatory Compliance Category > Labour Relations and Legislation Forum > [Question] Penalty clause for termination or resignation during a probation period

## MikeM

Hi this is my first time on The Forum, I apologize in advance for the length and or formatting of this post, but I require urgent assistance. 

I recently relocated from Durban to Gauteng to work for an IT company, I commenced employment in April and this (August) is my 5th month there. 

My employment at this company is subject to a 6 month probation period, but as yet I have had no performance reviews or any information or feedback on my chances of being kept permanent. The company is paying me quite a low salary for Johannesburg and it is becoming increasingly difficult to stay here, I have been offered other jobs to relocate back to Durban but here is where my predicament comes in. 

The employment contract states that there is a penalty for leaving due to training costs encumbered by the employer. The said "training" is basically in-house formal sessions with permanently employed more experienced staff "training" the probation staff. Any other training is the employee being given access to documents to learn on your own time. 

I will quote the probation clause and penalty clause from the contract, please excuse the length but I think it's required for context.




> 5.	PROBATION 
> 
> 5.1.	The employees appointment is subject to a period of 6 months probation.
> 
> 5.2.	Upon expiration of the probationary period, the employees appointment may be confirmed as a permanent employee or terminated. 
> 
> 5.3.	In the event that the employees services are terminated, it will be done in accordance with the requirements of the Labour Relations Act of 1995.
> 
> 10. TERMINATION OF EMPLOYMENT
> ...


Since I have only been with the company about 5 months out of my 6 months probation I would like to know that if the employer terminates my employment after the probation period or I resign before the probation period, am I liable for this penalty? The money stipulated in the repayment for Year 1 is about double what my annual cost to the company is and I have only had "in-house training". I have not been given the opportunity to attended local, international or college accredited courses.

Any assistance will be greatly appreciated!

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## HR Solutions

I have not read the whole thing, but yes you are responsible for the cost of training etc.  It is exactly for this purpose that it is written into the contract and we have it as well.  Money is spent on an employee not for them to up and leave.

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MikeM (20-Aug-15)

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## MikeM

> I have not read the whole thing, but yes you are responsible for the cost of training etc.  It is exactly for this purpose that it is written into the contract and we have it as well.  Money is spent on an employee not for them to up and leave.


I understand this yes. But so far, I am on probation and not a confirmed permanent employee of the company.

It's not about up and leaving, if they were to terminate my employment during or at the end of this probation period does that still make me liable?

This training provided has been all in-house, there is no certification or the like provided. It's employees training each other, no actual cost is encumbered to the company to provide this in-house training.

I have had similar penalty clauses at other companies, but nothing so exorbitant, and I haven't been terminated or resigned in that period.

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## HR Solutions

There is always a cost of training whether it is in-house or certificate !
Im afraid I fully agree with the employer on this one - this has happened to me and now I will tie employees up with contracts like this as well.  I will not waste my time and money on any more training only to have the person leave without paying it back. Sorry
I spoke to the department of Labour and they agreed that a company is well within its rights to put those clauses in a contract so I think there is your answer.

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MikeM (20-Aug-15)

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## AndyD

What did the training consist of exactly? A third of a million Rands penalty for the first year sounds punitive to me if it was anything less than full time specialised training for a recognised qualification. 



> 10.15.5. insofar as the payment by the employee to the employer in terms of this agreement may be considered or deemed to be a penalty clause as contemplated by law, the employee hereby and herewith acknowledges and agrees that such penalty clause is fair and reasonable, and that should the employee at any stage wish to allege the contrary, the employee shall have the onus to prove that such penalty clause is not fair and reasonable;


Looks like they're fully aware it could be considered manipulative or punitive by the addition of this clause and are trying to cover their asses.

I guess you could maybe run the contract past the CCMA for an opinion on it's compatibility with the labour law. I'm not a legal expert but I was under the impression that a probationary period worked both ways with no strings attached for the employer and the employee. I would however suggest an independent legal opinion might be money well spent at this stage.

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MikeM (20-Aug-15)

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## HR Solutions

> probationary period worked both ways with no strings attached for the employer and the employee.


I used to agree with this, but it becomes costly for employers to train people then they leave, and then it happens again.

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## MikeM

Thank you for your prompt responses HR Solutions. I fully understand the point you are making and I value your input.




> What did the training consist of exactly?


Hi AndyD thanks for your response.

During the first month I was left on my own with access to the companies system documentation to learn the system myself.

The rest has been designated sessions (of which there have been 4, since I have been at the company) with a more senior employee explaining a section of the companies system. The system is customized by employees for the companies clients and there are no formal qualifications or certifications derived from this in house training.

I can understand the companies requirement for such a clause as permanent staff are sent for highly specialized courses locally and internationally at company cost. However I am still on probation and cannot understand how I can be liable in the event they terminate me or I resign during this probationary period.

Clause 10.11 is sketchy on this 


> 10.11.	This clause 10.11 up to clause 10.15.6 shall only apply in the instance of terminations of employment during the initial training period of the employee and one year thereafter, which period will be a period of 36 months.


.

Whether the initial training period falls within the probation period or the period immediately after probation I don't know and this is not defined in the contract. I know a probation period is by law supposed to include employee training as Item 8(1)(e) of the Code of Good Practice: Dismissal (Under Schedule 8 to the Labour Relations Act, No. 66 of 1995) states that:




> [a]n employer should give an employee reasonable evaluation, instruction, training, guidance or counselling in order to allow the employee to render a satisfactory service.


Does this not entitle me as a probation employee to this in-house training at company cost due to probation? And as yet, the company has not evaluated me or given me any feedback on my chances of permanent employment. I have sought other employment due to the fear of termination as all other probationary staff meet BBBEE requirements that I do not, and the chances of termination due to operational requirements may arise.




> I would however suggest an independent legal opinion might be money well spent at this stage.


I believe you are correct in this regard, however affording legal fees on a low income is not going to be easy.  :Frown:

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## HR Solutions

There is a lawyer on this forum - Anthony Stern that can perhaps help you with some advice.

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MikeM (20-Aug-15)

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## MikeM

> There is a lawyer on this forum - Anthony Stern that can perhaps help you with some advice.


Thanks, I will try and contact Anthony for advice. 
Thank you again HR Solutions for your speedy response. 
I appreciate the time you have taken to read and respond to my questions. 

People on this forum are quite helpful and friendly.  :Smile:

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HR Solutions (20-Aug-15)

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## AndyD

> During the first month I was left on my own with access to the companies system documentation to learn the system myself.
> 
> The rest has been designated sessions (of which there have been 4, since I have been at the company) with a more senior employee explaining a section of the companies system. The system is customized by employees for the companies clients and there are no formal qualifications or certifications derived from this in house training.


IMHO... and I hasten to add it's my personal opinion and not a legal opinion, this would constitute orientation rather than training. If the employees who are the 'trainers' don't have any qualification that defines them as a teacher and the info you're being taught is the internal systems of the company itself plus there's no qualification at the end of it that's industry recognised then this would be a basic requirement for the employer to do this for all employees and not something that can be given an arbitrary value of a third of a million Rands and used as leverage to stop employees leaving the company. 

There's a few things that spring to mind, firstly does their 'mentoring and training' fulfill the actual definition or what mentoring and training actually is? Secondly, they've committed themselves to giving both mentoring and training, is what you've received both of them? Thirdly if you signed an employment contract as an employee on a long (6 month) probationary period would that same contract be valid if you are full time employed by the company after the probation or would that contract be invalid at that time and a new contract required because of the change in circumstances such as salary amount, no longer on probation or change in terms of employment, change in job description etc etc? Finally is that contract even legal given the value they've placed on what sounds like basic company orientation leaving the door open that it's being used as a threat to prevent you leaving when you're legally entitled to do so under national labour law.

I don't know any of the answers I'm afraid but this was my motivation for suggesting you need a legal opinion from someone who does.

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MikeM (23-Aug-15)

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## HR Solutions

If staff get trained internally or externally it is time and cost money.

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## HR Solutions

If staff get trained internally or externally it is time and cost money.

And if Dep of labour have agreed with it then it's legal

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## Citizen X

Hi Mike,

This is my opinion on your matter.

The law of contract is largely regulated by the common law. One of the requirements for a valid contract is that the conclusion, object and purpose of the contract must be lawful. An unlawful contract cannot be enforced.

1. Firstly, the only way for this company to claim this money whatsoever is to sue out summons for breach of contract;
2. Secondly, unlawfulness is not just the dictionary meaning of unlawfulness, in this case, if it were me, upon receipt of the summons, I would enter a notice of intention to defend, and in my plea cite as my defence that those clauses are contrary to ‘Public Policy,’ and therefore unenforceable. The Constitution is the face of public policy,
3. You can also cite as a defence that the bargaining power between you and the employer was not the same, as you really needed the job and signed it without fully understanding it, therefore there was no consensus and no meeting of the minds. (consensus is one of the requirements for a valid contract); the implication is this, They will then still deduct from your provident fund and leave pay(this will naturally not cover the full amount). There is case law to support this.
4.The onus of proving that you have breached the contract is on the employer(the party claiming breach of contract);
5.You can also cite ‘misrepresentation,’ as a defence, which is a very strong defence. You can base this on the fact that you were not evaluated whatsoever during this period, and that the employer represented to you that you would be evaluated;
6.You can also state that those terms and conditions are completely unreasonable and therefore also contrary to public policy.
So, if I was in your position I would take the other job offer. I would also accept that whatever little amount of my provident fund and leave pay will be deducted. I will accept that they will sue out summons for breach of contract, but also that I will have several defences.
7. You say that the courses are 'college accredited,' *are you sure???* Find out from the National Qualifications Framework, if not,  You can also state as a defence that the 'training courses,' are not accredited by the NQF and therefore not recognized as official, formal training and argue that an employee has a right to be trained and not charged for what is an induction program. All qualifications and courses must be registered with the NQF. I doubt very much that these in-house programs even stand a chance of been registered with the NQF. Not even a University charges that much.

Many years ago, I was in a similar position, I accepted a position of branch manager for a business college. It had similar provisions about costs of training etc. Upon commencing employment, I found that I was doing largely administrative work and not the work of a manager. I left after one week. I received a summons, at that time I knew nothing whatsoever about the law. I was scared, I went to the Johannesburg magistrates court library and began researching what I should do, I entered a notice of intention to defend and a very poorly drafted plea. My defence was simple ‘exceptio non adimpleti contractus.’(if you don’t perform , I don’t have to perform). I also cited ‘misrepresentation,’ my explanation was simple but effective. I used this illustration in my very poorly drafted plea: if one is offered a position as a truck driver and arrives at work only to find that he is required to be a forklift driver, that is misrepresentation. Even though my plea was very poorly drafted and contrary to every court rule there is, they withdrew the matter completely.

So there are valid defences that you will have at your disposal.

I hope this helps.

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AndyD (21-Aug-15), MikeM (23-Aug-15)

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## AndyD

Thanks Vanash.




> If staff get trained internally or externally it is time and cost money.
> 
> And if Dep of labour have agreed with it then it's legal


 Yes, there's always a cost involved to the employer even with in-house training but the thing I'd take issue with is whether or not this even constitutes 'training' in the first place and secondly placing a value of a third of a million Rand on it and effectively holding an employee to ransom with it which given some of the terms in that contract, to me at least, reeks of malice and abuse of power. As for being legal, I'm not qualified to say but I have serious doubts in this particular case.

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## HR Solutions

Im a bit confused .... so are you saying that the Department of Labour might be operating illegally by giving this advise ?


PS ... Just by the way when I first implemented it on the contract and sat down with the employee and highlighted it - their answer to me was "Yes that is normal" !

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## sterne.law@gmail.com

I have just read quickly.
The contract is one of slavery.

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AndyD (21-Aug-15), Citizen X (21-Aug-15), MikeM (23-Aug-15)

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## CLIVE-TRIANGLE

> I have just read quickly.
> The contract is one of slavery.


An ill disguised one at that.

HR, if there were one less zero I might agree with you.

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AndyD (21-Aug-15), Citizen X (21-Aug-15), MikeM (23-Aug-15)

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## sterne.law@gmail.com

I think we should clarify some aspects of a training claw back clause.
If a company pays for a course of study, then there is no doubt that they may claw it back via payment or time worked.
That is only fair. The employee has gained a benefit at the employers cost.

What we have is purported training, that in essence is very much part and parcel of every business.
If such terms were legal then every company could essentially charge for the day to day training and mentoring, clearly an untenable situation.
In fact the employer could profit, because even if the company terminated you are still liable to pay back the money, which in many cases will be more than the salary earned.

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AndyD (22-Aug-15), MikeM (23-Aug-15)

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## AndyD

> An ill disguised one at that.
> 
> HR, if there were one less zero I might agree with you.


If there were two less zeros I'd probably agree as well with the penalty clause reflecting the actual cost to the company but I'd still disagree about the morality (and probably the legality) of invoking a financial penalty against an employee for what sounds like in-house orientation of their internal systems and procedures.

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MikeM (23-Aug-15)

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## MikeM

Hi all

Thanks for all your responses.




> The law of contract is largely regulated by the common law. One of the requirements for a valid contract is that the conclusion, object and purpose of the contract must be lawful. An unlawful contract cannot be enforced.


I have been researching this topic and have found a few court transcripts. It seems in the cases I've been over where the employer claims an exorbitant amount for training, that far exceeds the employees remuneration, the court throws the case out as the clause is seen as _In terrorem_ which is not lawful in terms of employment contracts. Well that was my understanding of proceedings, I'm not very knowledgeable about law.




> Firstly, the only way for this company to claim this money whatsoever is to sue out summons for breach of contract


Thanks Vanash I believe you have given me some good defense ideas if the company does choose to sue if I am terminated or resign.




> What we have is purported training, that in essence is very much part and parcel of every business.
> If such terms were legal then every company could essentially charge for the day to day training and mentoring, clearly an untenable situation.
> In fact the employer could profit, because even if the company terminated you are still liable to pay back the money, which in many cases will be more than the salary earned.


This is what I thought as well Anthony, however that clause in the contract isn't worded very well. It seems like it could apply in a case where I am terminated or resign and I'm not even permanent.
Like I stated previously I do understand the company's need for this clause as they do send permanent staff on courses, some are even international and the company covers all the travel and course costs. 
But since I'm on probation, I have just had their in-house training.
I'm still not so sure that the costs are anywhere near the amounts in the clause, but it does seem they are just using this to inflict fear.

Anyway, I'm close to the end of this probation term, I will let everyone know the outcome of this, thanks for all the input and advice.

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## Dave A

> Im a bit confused .... so are you saying that the Department of Labour might be operating illegally by giving this advise ?


From posts in this thread, I gather that was for an instance you put to them.

I'm reminded of the legality of restraint of trade clauses - if it's reasonable and meets the criteria set by precedent, they're enforceable. If they're not reasonable, they're not enforceable. The devil is going to be in the detail and I doubt "one size fits all" for this sort of thing.

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## HR Solutions

I agree restraints of trade are not worth the paper it's written on.  As for the argument at hand I still stick to the law told to me by the department ..... In writing.

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