Training Bonds – How Enforceable Are They Against Employees In Nigeria?

Training Bonds – How Enforceable Are They Against Employees In Nigeria?

 

Introduction

The major focus of
most businesses is to achieve customer satisfaction by sustaining and/or
improving the quality of goods and services delivered to their clients. One of
the ways in which this value is achieved is by the continuous education and/or
training of employees.

 

It is therefore not
unusual that employers will cover the cost of continuous education and training
for employees, with the expectation that the skill set or qualification
acquired by the employee will be subsequently applied to the business.

 

There is usually no
controversy where this arrangement goes as expected. A conflict may however
arise where an employee after acquiring a new skill set or certification at the
employer’s cost terminates his contract of employment.

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Training
bonds

As a measure against
losses that could arise due to employees terminating their contracts after receiving
the trainings, employers often require employees to issue undertakings to
remain in their service for a specified period of time after the acquisition of
new skills or certificates. This, from the perspective of the employer,
guarantees that the employer will recoup the investment made in such employee.

 

Such undertaking is
popularly called a “training bond” which is an agreement between an
employer and its employee(s) that requires the employee to remain in the
service of the employer for a specified length of time, in consideration of the
employer paying for an acquired skill set or training of the employee.

 

Usually, training
bonds contain a clause that offers the employee an option to repay the bond
value (the sum expended in training the employee) where such employee desires
to leave the service of the employer, prior to the time specified in the bond
or undertaking.

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Enforceability
of Training Bonds under the Nigerian Law

It is the general
rule that all covenants in restraint of trade are prima facie unenforceable
unless they are reasonable and fair
1.

 

Consequently, if it
is the desire of an employer to ensure that employees, who have enjoyed
continuous education at the expense of the employer, remain in the employment
of the business for at least, a specified period of time, the employer must
ensure that such bonds are not onerous and are enforceable under the relevant
laws.

 

In taking this into
consideration, the employer needs to examine Section 34(1)(c) of the 1999
Constitution of the Federal Republic of Nigeria (as amended) which
provides as follows:

 

Every individual
is entitled to respect for the dignity of his person, and accordingly, no
person shall be required to perform forced or compulsory labour”
.

 

Pursuant to the
constitutional provision, section 73 of the Labour Act, Cap. L1 LFN 2004
2 prescribes the punishment for forced labour
as follows:

 

Any person who
requires any other person, or permits any other person to be required, to
perform forced labour

contrary to section 34 (1) (c) of
the Constitution of the   Federal Republic of Nigeria 1999, shall be
guilty of an offence and on conviction shall be   liable to a fine
not exceeding N1,000 or to imprisonment for a term not exceeding
two   years, or to both,”

 

The inference drawn
from the foregoing provisions of the law is that “forced labour” is prohibited
in Nigeria. Thus, taking that into consideration, as well as the position on
restraint of trade, Nigerian courts have previously held that restrictive
covenants are generally not enforceable
3.

 

However, in recent
time, the courts appear to be adopting a more pragmatic approach in determining
the enforceability of training bond, which is a form of a restrictive covenant,
under employment law. In other words, in determining whether a training bond is
a restrictive covenant and/or amounts to forced labour, the courts will
consider the circumstances of each case.

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The Case of
Overland Airways Limited v. Captain Raymond Jam

Overland Airways
Limited v. Captain Raymond Jam
4 served as a turning point on the issue of the
enforceability of training bonds. In that case, the National Industrial Court
considered the
terms
and conditions of sponsorship outlined in two training bonds executed by an
aviation company and one of its employees, in determining the enforceability of
training bonds in the aviation sector.

 

Brief Facts of the Case

Overland Airways
Limited (“Overland”), an airline operating in Nigeria, sponsored one of its
pilots, Captain Raymond Jam (“Raymond”), to undergo trainings in the United
States of America. Raymond executed
two training bonds and committed himself to remain in Overland’s employment
for 36 months and 12 months, respectively. Upon completion of the trainings,
Raymond acquired new licences and certifications. While the bonds were still
subsisting, Raymond resigned from the employment of Overland. Dissatisfied with
this development, Overland instituted an action against Raymond at the National
Industrial Court seeking to enforce the terms of the training bonds against
him.

 

In his defence, Raymond contended that the
training bonds were void and unenforceable under Nigerian law, as they
constituted unreasonable restraint of trade; unfair labour practice and were
contrary to public policy. He also argued that the training bonds contradict
the practice in the aviation industry wherein pilots were bonded only for the
period within which their licences are valid.

 

Overland countered this claim and argued that the
training bonds were not contracts in restraint of trade; they were freely
entered into by the parties; and were necessary for the protection of its
business interests. It submitted that training bonds are enforceable not only
in Nigeria, but also in other jurisdictions.

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Decision of the Court

In reaching its decision, the court considered the
custom of training bonds in line with international best practices,
particularly the practice in the aviation industry in India

 

It rejected Raymond’s contention that Overland’s
training bonds contradict the practice in the aviation industry in Nigeria
where pilots are allegedly only bonded for the duration of the validity of
their licence(s), as Raymond failed to adduce evidence in support of this
contention. It held, inter alia, that although training bonds are prima
facie
not enforceable as they are restraints to trade, it will however
enforce such bonds where it can be shown that it has been freely entered,
subject to the overriding condition of fairness and reasonableness with respect
to the duration and sum to be repaid by the employee in the event of his
breach.

 

While the court did not lay down the test for what
is “fair” and “reasonable”, it appears that the court applied the “reasonable
man test”. The court therefore held that the training bond between Overland and
Raymond were reasonable in the circumstance and fair; thus, they were
enforceable against him under Nigerian law. However, it limited the cost to be
recovered by Overland to the cost of the training pro-rated for the remainder
of the bond period. Raymond was therefore ordered to pay the costs accordingly.

 

Comment

A training bond is a
contract and the court will consider the general principles of contract: i.e.,
is it fair and reasonable? Is there evidence of duress? Is there evidence of
fraudulent misrepresentation? Is it common industry practice?  Will the
enforcement of the contract violate public policy? etc.

 

As seen in Overland
v. Raymond
, in order to determine what is fair and reasonable, the court
would consider the following:

 

a)   
whether the specified period for which the
employee must remain in the service of the employer is reasonable;

b)   
the estimated training cost must not be unduly
exaggerated as to render the employee incapable of repaying it; and

c)    
whether the employer has offered the employee
something extra (and not just the employment) as consideration for the
employee’s covenant to remain in the service of the employer for the specified
period.

 

Thus, there is no
hard and fast rule to this, as what apply to each case will depend on the terms
of the bond and the circumstance of each case.

 

Notwithstanding the
diverse reactions to this decision, it serves to benefit all the stakeholders
in the labour and employment sector. It may not only encourage employers to
invest more in the professional development of their employees without fear of
losing their investment in this regard, but it may also afford employees the
opportunity to garner skills and qualifications required to compete favourably
in the labour market, even after leaving the service of the employer. Finally,
it may foster mutual trust and respect between employers and employees in the
workplace environment.

 

Conclusion

The decision of the National
Industrial Court in the case of Overland v. Raymond (Supra) which has
been re-affirmed in the more recent judgment of the National Industrial Court
on 15 November 2018 in NICN/AK/49/2015- Dr. Victor F. Balogun & 2
Ors. v. Federal University of Technology Akure & Anor
., emphasises that
training bonds may be enforceable if the terms are fair and reasonable.

 

Employers and
employees are however advised to seek legal advice before drafting and
executing training bonds, to ensure that they will be enforceable in the event
of a conflict.

 

Footnotes

See Koumoulis
v A.G. Leventis Motors Ltd (1973) All N.L.R. 789;
Afropim
Engineering Construction Nigeria Ltd v Jacques Bigouret
(2012) FWLR (Part 622) 1740).

[2015] 62 NLLR (Pt.219)525

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