Monday, November 29, 2010

9th Circuit Holds Repayment of Training Costs Not Violative of FLSA

The Court of Appeals for the Ninth Circuit affirmed a lower court's decision to deny Plaintiff's Motion for Leave to File her Proposed First Amended Complaint because it found training costs due if employee quit before 5 years of service did not cause her to receive less than the federal minimum wage during her final workweek because the training costs were not "kick-backs" as defined under 29 C.F.R. § 535.31.

This is a very interesting case because the Plaintiff could have plead that she was paid below the minimum wage if repayment of the training costs was a "kick-back." Plaintiff did claim that whether the employer deducts the amount or demands it after issuing a paycheck is parallel but the court did not buy that argument and held, instead, that because they paid the employee above the minimum wage rate in the final workweek that it did not violate the FLSA--though some deductions were made from the final paycheck.

In coming to its conclusion, the 9th Circuit relied upon 7th Circuit precedent from Heder v. City of Two Rivers, Wisconsin, 295 F.3d 777 (7th Cir. 2002). Heder was decided in the context of a similar reimbursement scheme for city firefighters.
The Seventh Circuit upheld the reimbursement agreement, comparing it to a loan; the cost of the training was a loan the city made to its firefighters, repayment of which was forgiven after three years. Id. at 781-82. If, however, a firefighter left before three years of service, the loan became due. Id. As long as the city paid departing firefighters at least the statutory minimum wage, it could collect the training costs as an ordinary creditor. See id. at 779.
Applying this persuasive precedent, the Court held that the training costs were a voluntarily accepted loan, not a kick-back because the City could have hired already-licensed and trained individuals.

The case is Gordon v. Oakland, No. 09-16167 (9th Cir. Nov. 19, 2010)).

Enochs Law Firm

No comments:

Post a Comment