City of Oakland v. Hassey (Word)
filed June 17, 2008, First District,
Div. Four Cite as 2008 SOS 3583

Verdict on Payment of Obligations Upheld, Reimbursement Terms Reversed

This case was filed by respondent City of Oakland (City for brevity) against Kenny Hassey (Hassey for brevity) for breach of contract. The undisputed facts are as follows:

In 1996, the City of Oakland and the Oakland Police Officers’ Association entered into a Memorandum of Understanding (MOU). The agreement authorized the city to require police officers who have undergone training with the Oakland Police Academy to reimburse the city for training costs should the trainee leave the police department before completing five years of service.

Hassey entered into a “Conditional Offer of Position as a Police Officer Trainee” on December 15, 1997 with the Oakland Police Department. The contract, consistent with the MOU, states that Hassey’s selection was subject to the condition that he will reimburse Oakland his $8,000 training expenses should he terminate his employment voluntarily with the department within 5 years.

On March 16, 1998, Oakland hired Hassey as a police officer trainee.  Hassey signed the reimbursement agreement which contained the same repayment provision that was set forth in the conditional offer.  After attending the Oakland Police Academy from April to November 1998, he was promoted to police officer and was assigned to the police department’s field training program.

Hassey declared in his summary judgment motion that on February 1999, his field training officer told him that he was not performing according to standards. His superior advised him to resign in lieu of termination; and he did on February 10, 1999. Hassey signed a repayment agreement, acknowledging that he owed repayment of $8,000 for his training costs, to be paid in 24 monthly installments of $333.34.

Consequently, Oakland withheld Hassey’s February 25, 1999 paycheck to cover $725.28 of the money owed under the repayment agreement.  An April 30, 1999 check to cash out Hassey’s retirement balance was again withheld to cover $654.80 of the money owed. A balance of $6,619.92 remained.  Oakland sent Hassey a series of collection notices but he did not respond.

Thus, on October 17, 2001 Oakland filed a complaint against Hassey for breach of contract. Hassey answered through an affirmative defense stating that the contract was unenforceable because it violated the Fair Labor Standards Act, the California Labor Code and the Business and Professions Code.

The trial court ruled in favor of respondent by granting its motion for summary judgment; and against Hassey by concluding that there was no legal issue as to whether Hassey owed money under the repayment agreement. As a result, the court found Hassey liable to Oakland for $6,619.92. The trial court denied the motion for summary judgment of Hassey. Hence, this appeal.

The California Court of Appeal found, among others, two relevant issues, to wit:

1. Whether or not the conditional offer, the reimbursement agreement, or the repayment agreement violate the FLSA or other federal and state laws;


2. Whether or not withholding Hassey’s checks violated those same laws.

On the first issue, Hassey pointed out that the FLSA mandates Oakland to pay its employees at least the minimum wage, that it pay them overtime, and that for this purpose, each workweek stands alone. Hassey alleged that Oakland violated the laws on minimum wage and overtime pay because even though it paid him above the minimum wage, he did not receive his wages “unconditionally” as required by these laws. He pointed out that his employment was subject to the “condition” that he shall reimburse his training expenses should he decide to leave the department before 5 years.

The trial court, relying on the earlier case of Heder v. City of two Rivers, Wisconsin, denied Hassey’s argument.

Hassey additionally contended that the reason for the FLSA violation was because his training was primarily for the benefit of his employer, which brought it into the definition of “wages” under the said law. According to Hassey, the training cost is included in the phrase “or other facilities” such that Oakland may add this cost to the cash wage of Hassey for purposes of complying with the FLSA.

Undoubtedly, the trial court’s order did not discuss whether providing Hassey’s training was primarily for the benefit of Oakland, or not. But granting that it is, and that Oakland is prohibited from deducting the training cost from Hassey’s wages if it would drive his wages below minimum, still Hassey has not established enough proof showing a FLSA violation.

Moreover, Hassey admitted in court that there was no evidence of how much he made during his training.  Yet even assuming that Oakland deducted the training cost as he received it, the court presumed that such a hypothetical deduction would not have driven Hassey’s salary below the minimum wage.

The Court of Appeal therefore held that the stipulation requiring Hassey to repay the department for his training expenses should he leave before 5 years is lawful.

On the last issue, the Court of Appeal ruled differently. The Court sided on Hassey’s argument that FLSA requires the employers to pay their employees the statutory federal minimum wage. As held in the Heder case, although the employer is entitled to reimbursement for the training cost, it also has the obligation of paying its employee his wages. Consequently, it has to seek reimbursement as an ordinary creditor. This ruling is consistent with the California rule which states that “an employer is not entitled to a setoff of debts owing it by an employee against any wages due that employee.”

Also, citing Barnhill v. Robert Saunders & Co., the court pronounced that “such collection of a debt violates the absolute exemption that wages have from levies of attachment.” Under the FLSA, this rule stands even if the employee agrees to the withholding.

Evidence shows that in the conditional offer, reimbursement agreement, and repayment agreement, Hassey stated that he was obligated to reimburse Oakland for the training expenses should he leave the police department before the end of five years. But nothing in the said agreements shows that the reimbursement shall be deducted from his paycheck.

Wherefore, the judgment is partly reversed and partly affirmed. The Court ordered that the case be remanded to the trial court.