Advice

‘How enforceable are law firm claw back clauses on LPC/SQE funding?’

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I’ve been told I will need to repay it if I don’t stay on post-qualification

In the latest instalment in our Career Conundrums series, one rookie solicitor wants to know how enforceable ‘claw back clauses’ are in relation to LPC/SQE funding.

“How enforceable are claw back clauses* in relation to LPC/SQE funding? My firm has a claw back clause requiring repayment of funding in the event of not staying on post-qualification. Just wondering how enforceable this really is?”

* Some law firms have clauses in their training contract stating new recruits are liable to repay their LPC/SQE sponsorship if they leave the firm upon qualification.

If you have a career conundrum, email us at team@legalcheek.com.

28 Comments

X.

If you raise it with your new firm, 90% of the time they will pay it back for you

Mr N Queue

Imagine if the new firm has a claw back clause on repayments of clawbacks.

Trainee

I believe both VWV and DWF have been reported in LC and RoF for trying to claw back LPC grants. Not sure how successful they were.

Curious Anon

I think it would be helpful to add to this question that often firms deduct funding for LPC, ACCA, STEP, SQE etc. from final salary in the months between handing in your notice and leaving.

It would be helpful to see if anyone has insight on whether there is any practical recourse for the resigning employee in these circumstances. I would assume not if it was in the conditions of the firm providing funding.

Archibald Pomp O'City

How about not signing the contract in the first place if you don’t want to repay – via your commitment – the money they have kindly spent on you?

MC Ass

At qualification, you’ve repaid them by billing 20x the money they spent on you over two years. Only shyt firms would ever try to claw back at that point. They’re not being “kind”, they’re charging for your time from the day you start in the office.

Archibald Pomp O'City

Then don’t sign up to a restrictive covenant, shyt firm or not. These people ate the steak.

Anonymous

Name and shame!

Associate

I understand them trying if you left whilst still a trainee but your 2 year fixed term contract will expire after the two years, and so does your obligation to repay. You cant enforce a penalty (for starters) for not entering into a new contract on expiry of the old. By the time the penalty will come into play the fixed term contract would expire. To the extent its not fixed term and you will just continue into qualification, there would need to be some water tight drafting in there for it to not seem like penalty drafting. For example a sliding scale of payments, how its reduced and over what time period, how payment would be taken etc.

If it doesn’t contain the above, or, anything in the relevant clause says ‘may’ you’re in the clear and stick the fingers up at them on the way out for shamelessly grabbing money back from employees.

Just an average lawyer.

Sorry but I see this in a different way. Your obligation to repay the funding isn’t linked to your training contract, it’s linked to the relevant funding agreement (well, at least in my circumstance). I.e. that obligation continues past the expiry of your TC as it is not dependent on the exist of the TC to be enforceable.

The clauses within funding agreements are very enforceable, it just depends on the law firm’s desire to enforce those clauses. Ultimately it comes down to whether or not the firm wants to spend time and money to claw back the sums. Most of the time, firm’s don’t see the effort required as being equal to or more important than the sums they would hope to claw back.

Associate

I wasnt aware of the existence of a separate funding agreement as part of OP’s question. It was just referenced as a claw back clause, presumably part of their employment contract which is likely to be fixed term. Separate funding agreement, yes you are right but not what was conveyed here.

Anonymous

Any case law in this area?

Trainee

Yeah mine currently has a sliding scale payment mechanism as follows.

In the event that you leave the Firm at the end of the Training Contract , where a Newly Qualified opportunity has been reasonably been made available to you, the Offeree will be required to repay the cost of the Course fees as follows:-
– 100% of the fees if he leaves the Firm within the first 6 months of being admitted as a Solicitor; or
– 50% of the fees if he leave s the Firm between 6 months and one year of being admitted as a Solicitor

Timmy

That’s shocking, name and shame please

Mr X. Mr Ex. Mr Ecks.

Oh you lucky jammy dodger.

My sliding scale mechanism requires 50% repayment upon leaving the firm within 2 years of qualification.

Associate

Not bad drafting. Have the fees been specified? Courts likely to look to the amounts specified to determine whether its a deterrent or genuine pre-estimate of loss

Coldplay isn’t that bad

Can’t speak for the OP however the fees were specified in the agreement and then the claw back clause are percentages of that on a sliding scale

It is nearly May

As the issue is the terms of repayment of a voluntarily accepted cash payment rather than the consequences of a breach of contract, the court is not going to look at that point for very long.

Shocked

Wow that is utterly outrageous, I am horrified that this seems to be an even somewhat widespread practice. It makes total sense to require people to finish their TC but to basically set NQs up into indentured servitude for years after is shocking. They should absolutely not be able to get away with this. If the firm has a problem with NQs leaving, they should reflect on why they are not keeping staff (conditions? the kind of terrible culture evidenced by this sort of practice?), rather than threaten them with fines. If after 2 years the firm is not for the NQ, or perhaps they are not even offered a practice area they want, how dare the firm try to hold them hostage?

Get That Dough

There definitely is no clawback for scholarships at the Inns of Court.

I got given £15k between the GDL and BPTC years.

happy4u

that’s nice

Shotgun B’stard and Dribble LLP

We OWN you!

Mwhahahahaha!!!

IB Big Hat

Who the f*ck cares about 15k anyway?

GTFOuttahere

Unenforceable penalty clause. Even the sliding scale doesn’t work as a genuine pre-estimate of loss.

No reputable firm does this.

Jim Bunny

How did this person pass contract?

Hm?

My firm requires trainees to self-fund the LPC (albeit with a £3,000 grant to support), and upon commencement of the TC, you’re given £10,000 by way of an “LPC loan agreement”.

The loan agreement is deemed repayed after 2 years service post-qualification, reducing by 1/24 each month you remain employed. If no suitable role for you exists on qualification the firm will not seek repayment but if you qualify into a team you’re then on the hook for the monies.

If you leave before 2PQE, the repayment clause bites and the firm calculates the amount outstanding by reference to the number of months you’ve been qualified (as above, reducing by 1/24 each month for 2 years).

Perhaps as a matter of absolute coincidence (or not) the firm struggles desperately to retain its “home grown” talent beyond 2PQE.

Anecdotally, in my region’s September ’21 qualification cohort of 6, 4 are leaving (or have left) already.

Large regional outfit.

Old Man River

Some points that overlay everything (from an old codger):

– If you leave on qualification to go to a competitor (and were offered a permanent contract by your original firm in your preferred practice area), be prepared for them to make it difficult (ie attempted enforcement is more likely) – they may do this by setting off against final pay (ie only partial recoupment). Is this fair? Generally, yes – they did advance you money on condition of clawback. I’m not aware of an obligation to accept it.
– If you leave on qualification but were not offered an NQ gig or your preferred area, chances of enforcement are lower. If they don’t have space or don’t rate you, they won’t enforce. Sorry (but also, yay).
– If you leave within the clawback period because of any issues with your experience at the original firm (eg overworked; nasty supervisors), you have a defence to the enforcement and I would strongly push back.

Disapproval of this unhinged behaviour

The idea of a clawback is absolutely ridiculous. Yes, getting a TC means ultimately training and learning how to become a solicitor, but it’s highly unlikely everyone knows what kind of lawyer they want to be from the point of application, or if they still want to be a lawyer.

Interests change, people change, we grow and develop. You could train at one firm but have an interest in another, or the same practice area but earn a lot more money elsewhere. That’s like a former employer seeking the salary paid because I found a better opportunity elsewhere.

Some people also change firms/leave law entirely after a TC. I know of someone who didn’t stay after qualification not because of practice areas or a salary, they loved the idea of being a lawyer and was so passionate, but they didn’t have the greatest experience during their TC, which ultimately made them v unhappy. It’s all multifaceted – some change for interest, others for salary, and some for burnout or other circumstances.

With any TC offer, no job is guaranteed at the end anyway, and not every firm retains everyone, so a clawback clause is absolutely unhinged behaviour. Name and shame!

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