Discouraging Employee Departures

Because employers invest money in hiring, training and developing their employees, they would like their employees to remain in their employ. You know how it goes. You spend time and money on recruiting the best candidates. Then, you teach the ones you hire how to do their jobs. Just as the best one of the bunch gets to the point where she is ready to contribute to the enterprise, she up and leaves to join the competition. What does the law allow employers to do to retain employees?

The best way to retain employees is to offer competitive pay and benefits, an enjoyable working environment, and a job that matches the employees skills. So as long as you do not discriminate on the basis of a prohibited characteristic, the law allows you to offer whatever incentives you like to encourage employees to stay. This how-to guide from The Wall Street Journal has some ideas about how to hang on to your employees.

Disincentives are another story. For example, California law is quite clear that you may not require an employee to sign a non-compete clause that bars her from quitting to join the competition. Business and Professions Code section 16600 provides that, with few exceptions, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

Although you might be tempted to charge departing employees for the investment you made, there are restrictions on that, too. Labor Code section 2802 requires employers to absorb all the regular costs of doing business, including recruiting and training employees to do their jobs. If the employer pays for voluntary training or education that is not required for the job, the employer may charge that back to the employees. For discussions of the distinction, see USS-Posco Industries v. Case (2016) 244 Cal.App.4th 197 and In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498. To implement such a program, you will need a written agreement that the employee signs before receiving the training.

There is also room within the law for tying some aspects of compensation to a commitment to sticking with the employer. In Schachter v. Citigroup, Inc. (2009) 47 Cal.4th 610, the Supreme Court upheld an incentive plan that allowed employees to receive part of their compensation in the form of discounted restricted stock, which had a two-year vesting period. If an employee voluntarily terminated employment or was terminated for cause before the end of the two-year period, the restricted stock would be forfeited. That same concept can be applied to payment of relocation expenses, and signing bonuses. The idea is that the employee has not earned the payment, until she has worked the specified amount of time for the employer. Keep in mind that the Schachter case involved only a two-year delay in receiving the compensation. Imposing a requirement that the employee remain employed for an extended length of time might render the plan unlawful.