Legally Speaking: The enforceability of training bonds
When air operators hire pilots, they often need to send the new hires to receive training and become type rated on a particular aircraft. The cost to train pilots can be substantial. In order to minimize the risk in making a large investment in new hires, employers often require pilots to enter into an agreement in which pilots agree to work for the employer for a minimum time period.
November 3, 2011 By Krista Bulmer
When air operators hire pilots, they often need to send the new hires to receive training and become type rated on a particular aircraft. The cost to train pilots can be substantial. In order to minimize the risk in making a large investment in new hires, employers often require pilots to enter into an agreement in which pilots agree to work for the employer for a minimum time period. If they fail to do so, they will be held responsible for some or all of the cost of training them. These agreements are commonly referred to in the aviation industry as “training bonds.”
Pilots generally feel that training bonds are unfair, especially if enforced after the pilot has been terminated or when the employer has gone bankrupt. Conversely, air operators view the training bond as insurance against having a pilot jump ship and take his or her newly acquired skills to a competitor. But are training bonds enforceable?
The short answer is yes, a properly drafted training bond is enforceable. When looking at training bond agreements, there are certain things you need to consider. Every contract requires an offer, the acceptance of that offer and something called “consideration.” Consideration is basically the exchange of something of value by the parties to the agreement. If the agreement is signed after the training is completed, it may not be enforceable because at the time the contract was signed nothing of value was exchanged.
This is precisely what happened in the 2011 case, Northern Thunderbird Air v. Van Haron. The pilot signed a training bond agreement but after having completed the training. The B.C. Court of Appeal upheld the trial judge’s decision that there was no consideration for the training bond agreement, since the employer did not provide any further benefit to the pilot after the agreement was signed. Therefore, the training bond was unenforceable.
Recommendations in a 2009 discussion paper released by Human Resources and Development Canada (“HRDC”) proposed a framework for training bonds. The HRDC paper recommends that employers be permitted to require employees to post training bonds but it goes on to recommend that the terms of training bonds be regulated under Part III of the Canada Labour Code. No regulations with respect to training bonds are currently in force but it could be just a matter of time before the recommendations in the discussion paper become a requirement.
There seems to be consensus that the value of the training bond should decrease pro rata throughout the time period to which the pilot has committed. So, for example, if the bond is for $10,000 and the pilot committed to two years of service, the value owing under the bond would decrease by $416.67 every month as the pilot works off his or her obligations under the bond.
The term of the bond should be a fixed term, for example 12 months, and the total amount of the bond should not be more than the cost of the training. You should check to see that the amount is accurate.
Finally, a pilot should be relieved of any liability under the training bond if: the employer becomes bankrupt or insolvent if the pilot is terminated or suspended for any reason other than just cause or the employee’s decision to resign; or if the employer is in breach of the terms of the employment contract during the term of the training bond.
Although I am not a proponent of oral agreements, be aware they are still legally binding contracts. If you are offered a job over the phone as a pilot on the condition that you stay for 24 months due to the training cost and you accept the offer on those terms then complete the training, there is a binding agreement. If you leave your job before the end of the 24-month period, you are in breach of an enforceable contract. A court could hold you liable for some or all of the training cost, even if you did not sign a written contract. So, be sure to put every agreement into writing, and seek the advice of experienced legal counsel to avoid a situation where there is any question about your rights and obligations under the agreement.