Court Overturns Pre-Employment Agreement To Repay Training Costs

Brett Lloyd was hired by the City of Lewistown, Montana as a police officer in July 2001. As a condition of his employment, Lloyd signed a reimbursement agreement. The agreement required that if he did not work for the City for at least 36 months he would repay the City a portion of its expenses in sending him to the Montana Law Enforcement Academy for required training as a peace officer.

Lloyd resigned on November 1, 2002, after he had been employed by the City for about 16 months. The City then notified Lloyd that it would seek reimbursement under the agreement. The City calculated that $4,064.20 was owed by Lloyd as reimbursement under the agreement, deducted from that amount $803.32 that it withheld from Lloyd’s salary, and sued Lloyd for the balance.

A trial court ruled in favor of the City, awarding not just the amount the City claimed Lloyd owed but also required Lloyd to pay the City’s attorney fees. Lloyd appealed to the Montana Supreme Court.
The Court overturned the trial court’s decision and ruled that the reimbursement agreement was unenforceable. The Court pointed to Montana’s public employer collective bargaining law, which requires employers to collectively bargain with labor organizations over “wages, hours, fringe benefits, and other conditions of employment.”

The Court found it self-evident that the reimbursement agreement was a “condition of employment.” In the Court’s eyes, the agreement specified how long Lloyd was required to work for the City without penalty, and expressly stated that “the officer’s signing of this agreement is a condition of his/her being hired as a regular full-time probationary police officer with the Department.”

The Court ruled that “because the reimbursement was a condition of employment, the state collective bargaining law requires that the condition be bargained for. It is undisputed that the City’s policemen had formed a bargaining unit, that the Montana Public Employees’ Association was their representative, and that a collective bargaining agreement had been negotiated and signed.

“If the reimbursement agreement was not authorized under the collective bargaining agreement then it was not bargained for, and the agreement is unenforceable. The City argues that the reimbursement agreement was impliedly authorized by the collective bargaining agreement, and thus was bargained for. However, the collective bargaining agreement does not authorize or even address reimbursement agreements. Nor does it authorize the City to bargain individually with employees regarding conditions not expressly addressed.”

The Court concluded that “as a matter of law, the reimbursement agreement is unenforceable because it conditioned Lloyd’s employment upon an agreement that was not bargained for.”

Lewistown v. Lloyd, 2006 WL 2053110 (Mont. 2006).

This article appears in the September 2006 issue