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The court found that the visa, travel, and recruitment expenses primarily benefited the employer and that, as per U.S. Department of Labor regulations, the employer must reimburse the workers for those costs if the workers would otherwise effectively receive sub-minimum wage compensation. See 29 C.F.R. §§ 531.3(d), 531.35.

The court relied heavily on the fact that a 2009 Department of Labor Field Assistance Bulletin declared that employers must reimburse H-2B visa workers for the costs of transportation, obtaining a visa, and third-party recruiters whose services the employer retains. The Field Assistance Bulletin reasoned that the costs of transporting H-2B workers and of obtaining an H-2B visa primarily benefit the employer because the H-2B visa program provides “greater-than-normal” benefits to the employer, since such workers are available to an employer only if it attests that no comparable domestic workers are available. In concluding that the recruitment costs primarily benefited the employer, the district court emphasized that the employer had retained the third-party recruiter’s services.

The courts have been divided on this issue. The Eleventh Circuit has similarly ruled that travel and visa expenses must be reimbursed when a worker’s effective wage received would otherwise be below minimum wage. See Morante-Navarro v. T&Y Pine Straw, Inc., 350 F.3d 1163, 1166 n.2 (11th Cir. 2003). The Fifth Circuit, however, has held to the contrary. See Castellanos-Contreras v. Decatur Hotels, 622 F.3d 393 (5th Cir. 2010) (en banc).

This entry was written by Bruce Millman and Nicholas Ortiz.

Photo credit: oddrose
 

Courtney Gordon, the Plaintiff-Appellant, was hired under this agreement, and resigned after only one year of service. On the day of Gordon’s resignation, the City informed her it was entitled to recover $6,400 (eighty percent of $8,000) in training costs. Accordingly, the City withheld income from Gordon’s final paycheck, but only in partial satisfaction of Gordon’s debt. As a result, Gordon received at least minimum wage income in her final paycheck, but was still accountable to the City for the remaining balance of her training costs.

Gordon then filed a class action lawsuit, seeking damages and declaratory relief under the Fair Labor Standards Act (“FLSA”), 42 U.S.C. § 1983, and various California state laws. At issue was whether the City’s paycheck deduction for training cost reimbursement constituted a “kickback” in violation of FLSA regulations (29 C.F.R. § 531.35: “The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer ... the whole or part of the wage delivered to the employee.”). The district court found that because Gordon’s paycheck still exceeded the minimum wage, despite the deduction, the City’s reimbursement demand did not violate the FLSA. The Ninth Circuit Court of Appeals affirmed.

Gordon is significant because it marks the latest Circuit Court of Appeals to uphold a training cost reimbursement agreement under the FLSA. Following the Seventh Circuit’s reasoning in Heder v. City of Two Rivers, Wisconsin, 295 F.3d 777, 781-82 (7th Cir. 2002), the Ninth Circuit called the City’s reimbursement agreement “a voluntarily accepted loan, not a kick-back.” Thus, the court explained, the cost of the training was a loan the City made to its officers, repayment of which was forgiven after five years of employment. And as long as the City paid its departing officers at least the statutory minimum wage, it could collect the training costs as any other ordinary creditor could, without violating the FLSA.

This entry was written by Milton Castro.

Under the new rules, employers must pay terminated employees commissions or bonuses already earned, based on routine or practice or special agreement. An employee earns a commission or bonus when the employee has met all required conditions set forth in an agreement. The regulations state, however, that if an employer wishes to change the terms of such an agreement, it must do so in writing and with notice to the affected employee. In addition, the regulations provide that draws against commissions or bonuses may be recovered from an employee’s pay.

The regulations also provide guidance regarding loans to employees. For example, employers may only recoup employee loans using the written authorization described in Texas Labor Code §61.018 (pdf), unless it is a “wage advance.” Under the regulations, a wage advance is an advance that is recovered from the next regularly scheduled paycheck. Such an advance is not considered a deduction or withholdings under Texas Labor Code §61.018. The regulations further provide that, in recouping a loan, employers may count the loan repayment toward any minimum or overtime wages due.

The regulations also state that expense reimbursements paid to employees are not wages for purposes of the Texas Labor Code.

This entry was written by Harry Jones.

Section 778.217(d) undermines commuter benefits laws by acting as an inducement for employers not to provide transit subsidies. For example, employers that allow their employees to pay for commuting costs through pre-tax deductions obtain commuter tax benefits and do not incur any additional overtime liability. Conversely, more generous employers that subsidize employees commuting expenses incur overtime liability, which negates the effect of the tax benefit.

There may be a creative solution to this dilemma. Most employers who provide transit subsidies do so through a third party. Employers who provide commuter benefits through a trust or benefit plan should be able to exclude such benefits from the regular rate. The relevant DOL regulation provides that irrevocable contributions to a trust or third party that provides for “old age, retirement, life, accident, or health insurance or similar benefits for employees” are excluded from the regular rate. See 29 C.F.R. § 778.214 In order to qualify for this trust or benefits exemption, the employer must meet the five-part test outlined at 29 C.F.R. § 778.215.

It is unclear whether the DOL or a court would agree that a commuter benefit plan falls within this definition as “a similar [employee] benefit.” Some may argue that this provision should be limited to health and retirement plans. Commuter benefit plans are beneficial for employees, employers, and the environment. As it is in the public interest for employers to provide these subsidies, it is likely that if asked to opine on the issue, the Wage Hour Administrator would find that commuter subsidies are excluded from regular rate if they are provided through a qualified plan or third party. In the absence of such guidance from the DOL, employers should be cautious about structuring these benefits in consideration of their wage and hour obligations.

This blog entry was authored by Salvador Simao.