The City of Oakland, California has a policy requiring police officers to repay a portion of their training costs if they voluntarily leave the City’s employment before completing five years of service. The policy, which is incorporated in the labor agreement between the City and the Oakland Police Officers’ Association, sets the cost of training at $8,000, and requires repayments that vary from 20% to 100% depending upon how many years of service the employee has at the time of termination. Prospective employees acknowledge the training requirement by signing a conditional offer of employment.
Courtney Gordon was a police officer for the City. On January 25, 2008, before completing her second year of service, Gordon resigned. At that time, she was earning $37.80 per hour. In her final two weeks of work, Gordon was compensated for 60 hours. Her regular hourly pay, combined with an educational incentive in the amount of $117.33, resulted in Gordon earning $2,385.48 in gross pay for her final two workweeks. Gordon received a final paycheck reflecting this amount.
On the same day as her resignation, the City’s Fiscal Services Division notified Gordon that the City was entitled to recover $6,400 (80 percent of $8,000) in training costs. This notification stated that the City had withheld, in partial satisfaction of these claims, the paychecks for Gordon’s accrued unused vacation ($1,295.57) and compensatory time off ($654.77). Thus, the City’s total remaining demand was $4,449.66. This unpaid demand increased to $5,268.03 in March 2008 with the addition of a “collection fee.”
Gordon sued the City, alleging that the training cost repayment requirement was an illegal “kickback” under the Fair Labor Standards Act (FLSA). The Department of Labor’s “kickback” regulation, 29 C.F.R. § 535.31, provides that the FLSA’s minimum wage requirements “will not be met where the employee ‘kicks back’ directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee.”
The Ninth Circuit Court of Appeals found that the City’s repayment did not violate the FLSA. The Court reasoned that “the $5,268.03 payment Gordon made to the City is repayment of a voluntarily accepted loan, not a kickback. Instead of requiring applicants to independently obtain their police training prior to beginning employment, which the City could do by only hiring individuals already possessing a POST certification, the City elected to essentially loan police officer trainees like Gordon the cost of their police academy training. The conditional offer Gordon signed explained that the City would forgive her repayment obligation at the specified rate and that she would owe nothing after five years of service. Gordon, however, chose not to serve the five years necessary to secure complete forgiveness. Despite the debt Gordon owed following her resignation, the City satisfied the FLSA’s requirements by paying Gordon at least minimum wage for her final week of work.”
The City was therefore free to seek repayment of Gordon’s training debt as an ordinary creditor.
Gordon v. City of Oakland, 2010 WL 4673695 (9th Cir. 2010).
This article appears in the February 2011 issue