What is my obligation to repay tuition upon leaving my employer?

UPDATED: Sep 30, 2022

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What is my obligation to repay tuition upon leaving my employer?

I recently accepted a new job. My previous position allowed tuition reimbursement and specified that the amount would have to be re-payed if I did not maintain employment for at least 12 months following the tuition date. I left prior to 12 months and was obligated to pay the full amount I collected in the last 12 months. My employer notified me that I used $5,050 of tuition money in the last 12 months and that was the balance that would need to be paid back. They also notified me that they were entitled to use my vacation time bank in order to collect on what they were owed. I had $5,200 worth of vacation time accrued and my expectation was that it would be collected in order to pay the $5050 that I owed. Instead my employer paid out my $5,200, over $2,000 in taxes were collected and they captured the remainder. Now they are asking me to mail them a check for the balance of nearly $2,000. I feel that they should have collected the vacation allotment and not paid it out. The time was worth $5,200 to them, that is the amount that they would have paid out. However, now I’m being asked to pay the difference after I’ve already paid taxes on it. The benefits department states that they collect on the net vacation bank, not the gross. When I received the policy and a subsequent email from benefits alerting me to the $5,050 tuition dollars that I used they never specified that they collect the vacation time. Do I have any recourse?

Asked on May 10, 2016 under Employment Labor Law, Delaware


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

If the vacation pay had been paid to you, taxes would have been taken out; any compensation paid to you have taxes taken out. Similarly, if the vacation is used *for* you, such as to pay down a tuition debt, it is treated by the IRS as compensation paid to you since it is money, paid from work, benefiting you--even if you never touched the check yourself, it is money paid that reduces your debts or liabilities, and so is tax-wise and mathematically the same as if it had been paid to you, then you turned around and wrote a check for the net amount back to the employer. Therefore, since it is a form of compensation or income, taxes have to be taken out, and it is appropriate for them to only give you the benefit of the net amount. You are no worse off than if they paid you the money, net of taxes, then you wrote a check for that net back to them to apply against the debt. Based on what you write, becasuse you chose to leave early, you have to pay the $2,000. In the future, ask how a company handles matters like this in advance, before acting or resigning.

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