For-profit college Universal Technical Institute Inc (UTI.N) said it is being investigated by the U.S. Department of Justice after a former employee alleged the company had violated compensation laws.
The company said a former employee alleged that Universal Technical Institute's compensation of its enrollment counselors violated the incentive compensation ban of the Higher Education Act.
A federal law prohibits colleges from compensating employees based on the number of students they enroll.
Universal Technical Institute is also under investigation by the Department of Labor after the same employee alleged his employment was improperly terminated.
The company said it believes that the employment of the complainant was terminated based on failure of performance and not for any illegal or retaliatory reason, and that it intends to vigorously defend itself against the allegations.
Universal Technical Institute shares, which have lost more than half their value in the last one year, were down 4 percent at $12.35 in early morning trade on the New York Stock Exchange.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Viraj Nair)