‘Repayment Of Training Costs’ Agreement Can Violate FLSA

When he was hired by the Oakland, California Police Department, Kenny Hassey signed an agreement that he repay his $8,000 training expenses if he voluntarily terminated his employment with the Department before the end of five years. Hassey’s repayment obligation decreased each year he remained with the Department, so that he would owe repayment of the entire $8,000 if he left in less than one year, 80 percent of the $8,000 if he left before the end of the second year, 60 percent if he left before the end of his third year, and so forth.

After graduating from the police academy, Hassey entered the field training program. Hassey’s field training officer advised him he was not performing to standards and should consider resigning in lieu of termination. Hassey resigned on February 10, 1999, and signed a document entitled “Training Costs Repayment Agreement” that acknowledged he owed $8,000 for his training costs, to be paid in 24 monthly installments of $333.34.

The Department withheld Hassey’s final paycheck of $725.28 to cover some of the money owed under the repayment agreement. The Department also withheld a check for $654.80 designed to compensate Hassey for his retirement balance. Hassey then sued the Department, challenging the legality of the “Training Costs Repayment Agreement.”

In general, the Court found that the agreement did not violate any laws. Since the Oakland Police Officers Association had agreed to a repayment obligation, the Court found that there were no bargaining implications to the agreement. In addition, the Court concluded that in general terms, neither federal nor state law prohibited an employer from recouping training costs from employees who terminate.

Where the Court found the City ran afoul of the law was in its withholding of Hassey’s final check. The Court concluded that “the FLSA mandates that employers such as the City pay their employees at least the statutory federal minimum wage. An employee is entitled to keep any compensation that the FLSA specifies is the statutory floor below which no contract may go. That means, quite simply, that Hassey was entitled to at least the statutory minimum wage for the final pay period worked. This conclusion is consistent with the rule in California that an employer is not entitled to a setoff of debts owing it by an employee against any wages due that employee.”

City of Oakland v. Hassey, 2008 WL 2428205 (Cal.App. 2008).

This article appears in the September 2008 issue