In City of Oakland v. Hassey, (— Cal.Rptr.3d —, 2008 WL 2428205, Cal.App. 1 Dist., June 17, 2008), a California Court of Appeal considered an employee’s challenge to an agreement between a city and its employees that an employee who leaves employment before a specified length of time must reimburse the city for the costs of training the employee.
The court affirmed a trial court ruling that such an agreement does not violate the Fair Labor Standards Act (“Act”). However, it reversed another part of the trial court’s ruling and found that the city’s withholding of the employee’s final paycheck to partially reimburse its training costs did violate the Act.
The City of Oakland (“City”) and its police department’s union agreed to a Memorandum of Understanding (“MOU”) that required employees who received training at the department’s training academy to reimburse the City for the costs of their training if they left employment prior to completing five years of service. The MOU also provided that the repayment was due at the time of the separation and the City would deduct those costs from the employee’s final paycheck.
In December 1997, Kenny Hassey (“Hassey”) joined the Oakland Police Department and signed an agreement that if he voluntarily left employment prior to completing five years of service with the department, he would pay the City $8,000 to reimburse it for the cost of his training. He was hired as a police officer trainee in March 1998, and attended the training academy from April through October 1998. In February 1999, Hassey’s superior told him that his job performance was poor and that he should consider resigning or face possible termination. Hassey resigned.
The City withheld Hassey’s final paycheck for $725.28, and his $654.80 retirement account balance, and then sent him a series of notices telling him to repay the remaining balance of $6,619.92. Hassey did not respond.
The City brought suit against Hassey for breach of contract. Hassey cross-complained that his “compelled” agreement to repay the City for training expenses, and the withholding of his final paycheck, violated the Act. The trial court granted summary judgment for the City, and Hassey appealed.
The court cited Heder v. City of Two Rivers, Wisconsin (7th Cir. 2002) 295 F. 3d 777, in which the United States Court of Appeals rejected a challenge to a similar agreement between a city and its firefighters union requiring the employees to reimburse the city for training costs if they left employment prior to completing three years of service.
In Heder, the court likened the repayment requirement to other valid incentives that employers offer workers to stay with them and found that the city had a legitimate interest in seeking to provide its citizens with the benefit of its firefighters’ new skills. The same principles applied here, the court ruled, adding that nothing in the Act precludes such a reimbursement agreement..
Further, the court rejected Hassey’s contention that his training amounted to protected “wages,” because he received the training while he was an employee and was already receiving his wages.
However, the court found that the City did violate the Act when it withheld Hassey’s final paycheck to reimburse itself for his training costs. The Act requires employers to pay employees at least the federal minimum wage for any time worked. The court found that by withholding Hassey’s final paycheck, the City in effect paid him nothing for that period in violation of the Act.
Therefore, the appellate court determined the trial court was correct to grant summary judgment for the City on the question of whether the reimbursement violated the Act. However, it erred when granting summary judgment for the City regarding withholding Hassey’s final check. That portion of Hassey’s cross-complaint was remanded for further proceedings.