A U.S. District Court judge has denied an employer’s motion to dismiss, holding that an employer’s requirement that employees repay so-called training costs may constitute a wage violation.
United States District Court
SUMMARY: (court decision – opens in PDF)
“Plaintiffs Christopher Connor McClain (‘McClain’), Dennis Abramov (‘Abramov’), Miles Collins (‘Collins’), Jeffrey Butler Hanson, Jr. (‘Hanson’), Ricky LeBlanc (‘LeBlanc’), Samuel Shepherd (‘Shepherd’), William Tennant (‘Tennant’), Ohiana Negrete (‘Negrete’), Jose Mora (‘Mora’), Nathan Barnes (‘Barnes’), Steven Morton (‘Morton’) and Daniel Bianca (‘Bianca’), (collectively, ‘Plaintiffs’) have sued Defendant Cape Air alleging violation of the minimum wage under the Fair Labor Standards Act (‘FLSA’), 29 U.S.C. §216, (Count I) and Mass. Gen. L. c. 151 §§1, 20 (Count II), coerced labor in violation of the Trafficking Victims Protection Act (‘TVPA’), 18 U.S.C. §1595, (Count III) violation of the Massachusetts Civil Rights Act (‘MCRA’), Mass. Gen. L. c. 12 §11H–I, (Count IV) and unjust enrichment (Count V). … Plaintiffs McClain, Collins, LeBlanc, Shepherd, Negrete, Bianca, Morton, Tennant, and Abramov also allege breach of contract (Count VI) and breach of the implied covenant of good faith and fair dealing (Count VII). … Cape Air moved to dismiss all counts. … For the reasons stated below, the Court allows Cape Air’s motions to dismiss, D. 19–D. 30, in part and denies them in part. …
“Plaintiffs were pilots seeking Airline Transport Pilot (‘ATP’) certification, a requirement to pilot commercial air flights. … “… Plaintiffs allege that repayment of $30,000 in supposed training costs amounts to an unlawful kickback that would cause Plaintiffs’ wages to fall below the federal and Massachusetts minimum wage. … Cape Air argues that Plaintiffs’ theories have been rejected and that repayment of training and tuition costs are analogous to loans rather than unlawful kickbacks. …
“Here, Cape Air agreed to provide Plaintiffs the ‘necessary experience’ and training to achieve ATP certification. … On one hand, an ATP certificate is a portable credential that is a prerequisite for piloting any commercial flight. … On the other hand, Plaintiffs also allege that the purported $30,000 training investment is unmoored from the actual cost of ATP training, which is less than $10,000. …
The plausibility of Plaintiffs’ position is bolstered by the fact that Cape Air seeks the same $30,000 regardless of whether the pilot in question needed hundreds of hours of flight time (as most of the Plaintiffs did), or no flight time (like Abramov). … Nor does the amount vary based on the amount of time the pilot remained employed or whether the pilot in fact completed training. …
“The Court acknowledges that courts in other jurisdictions have characterized similar or greater training costs as loans rather than a kickback forbidden by the FLSA, even where the actual cost of training may be less than the amount sought by the employer. … Nor is there any firm rule that a training repayment provision amortize the debt owed based on the length of time the employee remained with the firm. …
In the absence of binding precedent, however, this Court is not persuaded that Heder [v. City of Two Rivers, 295 F.3d 777, 781 (7th Cir. 2002)] and its progeny stand for the proposition that all kickback claims involving a training repayment provision fail to state a plausible claim. Indeed, the Heder trial court, on remand, awarded the City only the roughly $1400 cost of books and tuition for paramedic training, not the liquidated damages the City originally withheld under the terms of the employment contract. … The Court, however, concludes that the issue is best resolved with the benefit of discovery. …
“Accordingly, the Court denies the motions to dismiss Plaintiffs’ minimum wage claims under the FLSA and Massachusetts law (Counts I and II).”
Other counts
“The Trafficking Victims Protection Reauthorization Act created a private right of action for victims of various human trafficking crimes outlawed by the TVPA. …
“The parties appear to agree that whether Cape Air’s collection of the $30,000 ‘Training Investment’ is a threat to use the legal process for a ‘purpose for which the law was not designed’ depends upon whether the repayment provisions in Plaintiffs’ employment offer letters and promissory notes are enforceable under state law. …
“Taking Plaintiffs’ allegations as true and drawing all plausible inferences in their favor, the Court concludes that Plaintiffs have adequately alleged that the $30,000 training repayment clause is unenforceable under Massachusetts law. …
“Accordingly, the Court denies the motions to dismiss the TVPA claims. …
“Here, Plaintiffs appear to allege a pattern of economic coercion based on Cape Air’s insistence that Plaintiffs agree to repay the $30,000 purported training investment under Plaintiffs’ employment offers and promissory notes. … Plaintiffs need not plead a physical confrontation to survive a motion to dismiss on their MCRA claim, where they allege a pattern of economic coercion similar to MCRA claims recognized by Massachusetts courts. …
“… As stated above in the analysis of Plaintiffs’ TVPA claims, this Court concludes that Plaintiffs’ have plausibly alleged that the training repayment provisions were unlawful and thus may proceed with their MCRA claims on this basis.
“Accordingly, the Court denies Cape Air’s motions to dismiss the MCRA claims. …
“… The Court has already concluded that Plaintiffs have plausibly pled that the training repayment provisions in their offer letters and promissory notes are unenforceable penalties and not reasonable liquidated damages provisions. As such, Plaintiffs have stated a claim for a declaration of non-breach. …
“… At a later stage in the litigation, Cape Air may well show that Plaintiffs’ did not bestow any ‘quantifiable’ benefits onto Cape Air beyond performance of job duties for which they were properly compensated. … For now, the unjust enrichment claims are adequately pled. …
“Accordingly, the Court denies Cape Air’s motion to dismiss the unjust enrichment claims. …
“… Cape Air may ultimately prevail in showing that it distributed flight hours to the First Officer Plaintiffs in good faith, but for the purposes of the Rule 12(b)(6) motions, the Court concludes that the First Officer Plaintiffs and Abramov have plausibly pled a breach of the implied covenant of good faith and fair dealing.
“Accordingly, the Court denies Cape Air’s motions to dismiss the claims for breach of the implied duty of good faith and fair dealing.”
“For the foregoing reasons, the Court allows Cape Air’s motions to dismiss, D. 19–D. 30, as to Count VI (breach of contract) only with respect to the declaratory judgment that First Officer Plaintiffs seek that they did not breach their employment contracts with Cape Air because these contracts were illusory, and to Abramov’s basis for the same claim that the repayment obligation did not apply to him prior to beginning his service as Captain. Cape Air’s motions to dismiss, D. 19–D. 30, are otherwise denied.”