Information and Commentary on Class Action Cases Affecting Employers

Employment Class Action Blog

Home | Employment Class Action Blog

Many employers have programs advancing or even paying the costs of employee education or training.&nbsp; Frequently, those policies obligate the employee to reimburse the employer if the training is not completed, or if the employee terminates shortly after completing that training.&nbsp; A recent Ninth Circuit case underscores that, if properly applied, these types of policies are lawful. In <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2010/12/Gordon-v.-Oakland.pdf">Gordon v. City of Oakland.pdf</a>, Case No. 09-16167 (9th Cir. Nov. 19, 2010), the City of Oakland, California required police officers to reimburse a portion of their training costs pursuant to a schedule if they left the city&rsquo;s employment with less than five years of service.&nbsp; The plaintiff, a former Oakland police officer, left less than two years after completing her training. At the time of her resignation she was making $37.8025 per hour, or roughly five times the minimum wage.&nbsp; Pursuant to the schedule, the city contended that she was liable to repay $6,400, part of which was offset against her accrued vacation and compensatory time. Incidentally, the opinion notes that the city did not offset the amount against her final paycheck entirely, apparently still paying her regular wage for her final two weeks of employment.&nbsp; Thus, there was no argument that she did not receive at least the minimum wage.&nbsp; In fact, the court appeared to accept the view that the city could have offset a portion of the costs, so long as she received pay for at least the minimum wage on her final paycheck.&nbsp; Of equal interest, the collective bargaining agreement would have permitted the city to offset the entire sum against pay, but the city wisely still paid more than the portion representing the minimum wage, thus avoiding a potential FLSA issue. In any case, the plaintiff still brought suit under the FLSA, contending that as a result of the mandatory repayment of training costs she was paid less than the minimum wage.&nbsp; She also sought to proceed as a collective action on behalf of similarly situated officers who had also had to repay training costs.&nbsp; The district court dismissed her claim and she appealed to the Ninth Circuit. The Ninth Circuit had no difficulty affirming.&nbsp; First, it found that because the city paid her final paycheck, there was no argument that she was paid below the minimum wage for any given week.&nbsp; Instead, the court concluded, she could only recover by proving that repayment of the training costs was a &ldquo;kick-back&rdquo; under 29 C.F.R. section 535.31.&nbsp; That provision reflects the common sense notion that the minimum wage represented money that was the employee&rsquo;s own, not money that had to be kicked back to the employer or third parties. The court found that repayment of training costs was more akin to the repayment of a loan than a kickback.&nbsp; The city, in fact, could have required employees to arrive with their training completed, and it essentially loaned the cost of the police academy training to those who needed it.&nbsp; This reasoning was in accord with decisions from other courts of appeal.&nbsp; The Ninth Circuit held that because the officer was in fact paid the minimum wage, and because the repayment of training costs was not a kickback, there was no FLSA violation. The bottom line:&nbsp; Even in the context of FLSA collective actions, employers can still require repayment of training costs so long as they do not reduce employee pay below the minimum wage.

Ninth Circuit Affirms Dismissal of Collective Action Arising Out of Repayment of Training Costs