IPA Pilots - Bonds – a necessary evil?

Bonds – a necessary evil?

The aviation industry has always seen pilots bonded normally as part of the offer of a job.  Most employers will issue the pilot with a contract of employment, and a separate bond agreement, although we have on occasion seen the detail of the bond included in the contract of employment. 

As we all know, the purpose of the bond is for the employer to protect their investment.  The normal process is that the employer will ‘pay’ for the employee’s type rating.  The employee will be bonded for a period of 2 – 3 years, with their liability for the amount reducing over that time.  At the expiration of that period, the employee has no further financial liability. 

For several years, bond agreements were rarely an issue.  This was primarily because there were very few job opportunities for pilots so the risk for a pilot breaching such an agreement was very slim. 

The only time a dispute would likely arise was if a pilot had not met standards and the employer looked to dismiss. 

Over the last nine months or so, we have seen an increase in pilots seeking advice as to the bonds they have signed, because they have been looking for a new job and have been offered a role they now wish to take. 

There is a myth that a bond is not enforceable.  Looking at the basics, a bond agreement is nothing more than a contract between two parties whereby in return for receiving something of value (a type rating), the pilot agrees to stay with the company for a specified time so that the employer has the benefit of the investment that they have made.  On the face of it, a bond agreement will be binding in law and thus enforceable should its terms be broken.   

A good bond agreement clearly set out the bond amount, plus a breakdown of how the costs are apportioned.  It will also specify the length of the agreement, and at which point it will start to decrease (normally after 12 months).  It will then say how it decreases, normally either on a month by month basis, or a fixed percentage for each of the remaining years of the bond.  It will also state what the triggering events are for repayment, and when repayment will not be necessary (ordinarily limited to cases of redundancy).  There will also be a clause asking the pilot to confirm that the amount specified is a fair representation of the training costs of the company. 

However, bonds as described above are few and far between, and even a well drafted bond will not prevent a dispute.  A pilot is only likely to be leaving a company during the bond period where they have found a better job, at which point we will be contacted to see if the bond is valid and enforceable by the employer.  To be valid, the training must have taken place, and we take the view that if the pilot has not received any benefit, the contract may be difficult to enforce.  A further dispute arises where the training has taken place, but the pilot considers the value of the training to be exorbitant.  Is the bond representative of the actual cost of training (which may include other costs such as travel, accommodation), or is it just an amount that the employer has plucked from thin air to discourage the pilot from leaving?  Furthermore, does it matter if the pilot has signed the agreement?  We have seen bonds ranging from a few thousand pounds up to around £80,000.  Can, and should there be such disparity? 

Most reasonable people will accept that aviation is an expensive business, and it is very unlikely that an employer will only incur minimal costs when recruiting a pilot.  Ordinarily a pilot will be bonded when they undertake a type rating (this might not necessarily be with a new employer), but recently we have seen a proposed bond for a pilot simply joining a company.  The advice was not to agree to this.  We have also seen employers try to bond pilots for recurrent training, which we do not consider acceptable.  They might also look to bond pilots who are moving fleet, either out of choice or because their current type is being passed out. 

There are very few valid grounds for challenging the enforceability of a bond agreement.  Non-completion of the training (through no fault of the pilot) might be argued, and training costs being exorbitant might assist in reducing the liability, but not extinguishing it entirely. 

At the IPA we fully understand the business reasons why airlines will want to bond their pilots.  With the employment market as it currently is employers may find it more difficult to insist on unreasonable terms to their bond agreements, but we would also suggest that it is incumbent on the pilot to explore fully the terms of the bond before signing it.  If you end up not liking where you work, that won’t get you over the threshold to successfully refute the terms of the bond. 

The bond agreement should also be reviewed by your union before you sign it.  Even if you proceed, at least you will enter into the contract with a full understanding of its terms and implications. 

Finally, the question that we are most frequently asked is whether the employer will seek to recover the outstanding amount of the bond should a pilot leave?  Our view is that airlines are beginning to crack down on pilots who leave during their bond.  The first tactic will be for the airline to withhold your final months pay, which will likely also include your flight allowances.  This is unlikely to cover the remaining liability on the bond, but of course if they want to seek to recover it, the (now former) employer will have to take the necessary court proceedings to try and recover the bond amount.  Leaving the jurisdiction will not in itself absolve a pilot of their liability.  In one case, the pilot did leave the country, only to return at a later date to find that the previous employer had got a court judgment in their absence that was enforced on their return. 

The best advice if you want to leave whilst you have a bond agreement is to try and negotiate a reduction in your liability.  From the employer’s perspective it will be better to come away with something than nothing and then be reliant on successful court proceedings.  We can assist with those discussions, and also advise as to whether there are legitimate grounds to challenge your liability. 

In conclusion, it would be hard to suggest that bonds are not necessary, otherwise employees would constantly benefit from gaining a type rating and then immediately going elsewhere.  Given the costs involved in training pilots, the concept of the bond is not in itself unreasonable.  That said, there is much that an employer can and should do to minimise the risk of one of their pilots wanting to leave during that period, which will likely result in a dispute as to liability for the bond.  The risk of a dispute is also less likely if the terms of the bond are reasonable in the first place. 

If our members are looking at changing employer, or have a contract or bond issue, we can advise, so please contact us on 01444 441149 or office@ipapilot.com

The Independent Pilots (Financial Services)

The Independent Pilots (Financial Services) Ltd was set up for the IPA and are specialist Chartered Financial Planners dedicated to providing the very best tailored advice for our members.

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