Introduction

It is now beyond any form of disputation that training bonds are recognised and enforced by Nigerian courts as valid and acceptable employment practice in Nigeria. The legality of a training bond is well ingrained in our labour and employment law jurisprudence. The National Industrial Court of Nigeria (“NICN”)¹ has acknowledged in several decisions, the right of an employer to use a training bond as security for the costs of the trainings sponsored by the employer to improve an employee’s professional and technical competence whilst in the employment of the employer².

Under a training bond, an employer bears the cost of training an employee to acquire the requisite knowledge and/or certification for the efficient discharge and performance of the employee’s responsibilities. On the other hand, the employee undertakes to exclusively apply the acquired knowledge for the employer’s work over an agreed period known as the “bond period”. 

The reasoning behind the recognition and enforcement of training bonds in Nigeria was well captured by His Lordship, Honourable Justice B.A. Adejumo, OFR, the President of the NICN (as he then was) in Overland Airways Limited v. Oladeji Afolayan & Anor (supra), where the court held thus:

“…a training bond seeks to compel a current employee whose training has been sponsored by the employer to work for an agreed duration so that the employer could derive the benefits of its investment on the employee. The case of A.G. FEDERATION V AWOJOODU (supra) relied upon is quite apposite on this point. Also, in line with the constitutional mandate of this Court to recognise and apply international best practices, I will like to state that the practice of executing training bond is practiced in different jurisdictions. see the cases of EDWARD MILES V. JETCENTRE LIMITED T/A THE PRIVATE JET COMPANY (supra) and NORHERN THUNDERBIRD AIR INC. V. VAN HAREN, (supra) cited by learned counsel for the Claimant are quite instructive. On the strength of the authorities that I have just referred to, I have come to the irresistible conclusion that Exhibits B & C are valid and enforceable as between the Claimant and the 1st Defendant.”     

Essentials of a valid and enforceable training bond

Having established that a training bond is a valid and acceptable employment practice in Nigeria, it is important to highlight that given the delicate nature and purpose of a training bond, the courts have over the years established some fundamental qualifications that must be satisfied before any agreement can be lawfully enforced as a training bond. Thus, the fact that an agreement was executed by the parties as a training bond does not necessarily make the agreement enforceable. The court will not enforce an agreement merely because the same was christened a training bond by the parties. The court will scrutinize the terms of the agreement to determine whether the agreement satisfies the conditions for a valid and enforceable training bond.

The features of a valid training bond can be discerned from the judicial pronouncements of the NICN. These features will no doubt provide significant guidance to employers that are desirous of adopting training bond as part of their training policies and programs. It must be emphasized that in cases involving enforcement of training bond, the training bond is the foundation of the cause of action. If the bond is invalid, any case built on it is bound to collapse. It is therefore imperative for employers to familiarize themselves with the requirements of law regarding enforceable training bonds. 

The reasonability test

One of the underlying principles governing the adjudication of any labour dispute is the need to protect the employee from any kind of unfair labour practices. It is a fundamental consideration in interpreting the terms of any employment contract. Under our labour laws, the employee is deemed as the weaker party in the employment relationship and must therefore be protected from any form of oppression by the employer. It is against this backdrop that the court will naturally examine the terms of a training bond to ascertain whether they are fair and reasonable.

The fact that an employee executed the training bond voluntarily is not sufficient proof that the agreement is fair and reasonable. Notwithstanding the circumstances of the execution of the training bond by an employee and the concept of freedom of contract, the court will still hold an inquiry into the terms of the bond to determine the fairness and reasonableness of the same. 

It must be noted that the reasonability test does not negate the fact that a training bond is a contract which must possess the essential ingredients of a valid contract such as offer, acceptance, consideration, intention to enter a legal relation and capacity of parties to contract. However, the fact that a training bond meets the requirement of a valid contract does not make it enforceable per se. The terms of the bond must also be fair and reasonable. A training bond must therefore satisfy both the contractual validity requirement and the reasonability test before it can be enforced by the court. The burden of proof is on the employer to show that that the terms of the training bond are fair and reasonable.

The following posers are apt at this stage, what is fair and reasonable in the context of a training bond? How has the NICN approached the issue of fair and reasonable? In arriving at its decision as to whether a training bond is fair and reasonable, there are certain terms of the agreement that the court will primarily examine and consider. In the recent decision of the NICN delivered on 12th April 2021 in Suit No. NICN/ LA/599/2018-Overland Airways Limited v. Shehu Sekula & 2Ors, His Lordship, Honourable Justice I.G. Nweneka poignantly stated the ingredients of reasonability as follows:

“Reasonability is determined by taking into account the bond period, the restrictiveness of the covenant and the amount required to be paid in the event of breach” (Emphasis provided by us)

Before discussing the above constituent elements of reasonability as it relates to training bonds, it is worth noting that the application of the principle of reasonability is on a case-by-case basis. It is driven by the facts and circumstances of the case before the court. 

• Duration of the training bond (bond period)

The duration of the training bond is a fundamental consideration in resolving whether an agreement is fair and reasonable. From the various decisions of the NICN, it is safe to contend that a training bond of between 1 to 3 years will be considered as fair and reasonable. The courts have been reluctant to enforce bond agreements that require an employee to continue in the employment of the employer for a period of more than 3 years³.

• Amount required to be paid in the event of a breach of the training bond

In most training bonds in Nigeria, the employee is usually required to refund the entire bond sum upon exit from the employment before the expiration of the bond period. This requirement has been held to be unfair and unconscionable as it does not consider the period that the employee may have worked for the employer after completion of the training. For example, it will be unconscionable to demand for a full refund of the bond sum from an employee that has worked for 2 years out of a bond period of 3 years. The courts have held that a clause providing for consequences for breach must be drafted to take into account the period that the employee spent in the employment of the employer after the completion of the training. In effect, the provision for refund of the bond sum should be prorated to consider the years that the employee may have spent in the employment of the employer after the completion of the training sponsored by the employer. 

• Nature of the training

This is another indicator of a reasonable training bond. The training that the bond relates to must be relevant and fundamental to the employee’s professional development. The training must not be one that the employee is ordinarily entitled to by virtue of his employment or that the employer is under a statutory duty to provide to the employee. The court also considers the nature and duration of the training in assessing the fairness of the bond period. It is a factor that the court will consider in determining whether the duration of the training is fair and reasonable.

• The bond sum

The bond sum should reflect the actual amount expended by the employer for the training covered by a training bond. There must be a proximity between the cost of the training and the bond sum. The court will not enforce a bond sum that is over and above the expenses incurred by the employer as the same will amount to a penalty for breach. The essence of compensation for breach of a training bond is reimbursement of the employer for any reasonable expense that it may have incurred in the training of the employee taking cognizance of the years that the employee may have spent in the employment. This principle was adroitly captured by His Lordship, Honourable Justice B.B. Kanyip (Honourable President of the NICN) in Overland Airways Limited v. Captain Raymond Jam [2015] 62 NLLR (Pt.219)525. At pages 609-610, His Lordship posited thus:

“Courts are enjoined, in making an award for compensation in the event of breach of an employment bond, to consider the circumstances of the case given that the employer might incur a loss and, therefore, may be entitled for compensation. However, Courts must note that the compensation awarded should be reasonable to compensate the loss incurred and should not exceed the penalty, if any, stipulated in the contract. The Court, of course, determines the reasonable compensation amount by computing the actual loss incurred by the employer having regard to all circumstances of the case; so that even if the bond stipulates payment of any penalty amount in the event of breach, it does not mean that the employer shall be entitled to receive the stipulated amount in full as compensation on the occurrence of such default. Rather the employer shall be entitled only for reasonable compensation as determined by the Court.”

See also the decision in Suit No. NICN/LA/141/2011- Overland Airways Limited v. Captain Joseph Gamra (unreported) judgment delivered on 7th January 2016, where the court held thus:

“What distinguishes a bond from a penalty is that in a penalty, the amount fixed for breach of contract is fixed as punishment and not as pre-estimate of the damages resultant from the breach. Thus, if the agreed sum to be paid on breach is a good pre-estimate of the damages to be suffered, then, the bond is enforceable but if not, it becomes a penalty and therefore unenforceable. Then, it follows that bond for breach of contracts are enforceable contingent on whether or not they are penalties or not.”

From the above decision, in order to determine reasonableness of the bond, the court would always consider the actual amount incurred by the employer. Accordingly, there must be evidence of the amount spent on the training and the actual loss suffered by the employer in consequence of the breach by the employee.

Conclusion

Considering the dynamic nature of employment relationships, breach of a training bond is an inevitable event. Where there is a breach of a training bond by an employee, enforceability would depend on the validity and reasonability of the training bond. Notwithstanding the validity of a training bond as a contract, the court will still scrutinize the terms of the bond to determine whether the same are “fair” and “reasonable”. Unless the terms of the bond are deemed fair and reasonable, the bond will be unenforceable irrespective of the agreement of parties.

1.  The NICN is the court clothed with the exclusive jurisdiction to adjudicate over any labour and employment disputes in Nigeria.
2. See the decisions in Overland Airways Limited v. Captain Raymond Jam [2015] 62 NLLR (Pt.219)525, Suit No. NICN/LA/464/2014- Allied Air Limited v. Kwabena Sarfo Ossei (Judgment delivered on 6th April 2017) and Suit No. NICN/LA/19/2011- Overland Airways Limited v. Oladeji Afolayan & Anor [Judgment delivered 2nd May 2014].
3. See Overland v. Sekula (supra).