The Fifth Circuit Court of Appeals recently addressed an issue arising under the Fair Labor Standards Act. Martin v. PepsiAmericas, Inc., No. 09-60896 (5th Cir. Dec. 28, 2010), available at http://www.ca5.uscourts.gov/opinions/pub/09/09-60896-CV0.wpd.pdf. The plaintiff sued her former employer for unpaid overtime wages. The district court granted the employer’s motion to dismiss after finding that the plaintiff’s maximum potential recovery was less than the value of her severance package, which the district court found should be set-off against any potential damages awarded to the plaintiff. The Court vacated the dismissal because it held that the proposed set-off was improper.
The Court reviewed prior decisions regarding set-offs in FLSA matters. It concluded that set-offs in FLSA cases should be looked on with disfavor unless the money being set-off can be considered wages that the employer pre-paid to the plaintiff. Here, the employer paid the severance amount in return for the plaintiff’s release of claims against it; the severance payment was not a wage payment and was unrelated to the plaintiff’s work. While the plaintiff may have breached the severance agreement’s terms by suing the employer, the employer is not entitled to set-off any damages from this breach of contract against the plaintiff’s FLSA claim.
To speak to an attorney at a Dallas, Texas employment law firm about the FLSA or another workplace legal issue, contact the employment lawyers at Clouse Dunn Khoshbin LLP at [email protected].
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