Martin v. PepsiAmericas, Inc.
17 Wage & Hour Cas.2d (BNA) 7
5th Cir.2010Background
- Martin worked for Pepsi as a route settlement clerk for ~5 years, later promoted to a salaried route settlement supervisor with disputes over whether the salary covered all hours or a 40-hour week.
- Upon leaving, Martin signed a severance agreement in which Pepsi provided a severance package in exchange for her release of claims; she did not obtain entitlement to certain benefits.
- Martin sued in April 2007 for unpaid overtime under the FLSA and alleged fraudulent misrepresentation and Mississippi punitive damages; Pepsi sought dismissal and asserted a right to set-off the severance benefits against any FLSA damages.
- The district court ruled Pepsi could set-off the severance value against potential FLSA damages but did not compare the set-off to the potential damages, and later dismissed for lack of subject-matter jurisdiction when the set-off exceeded potential overtime damages.
- On appeal, the Fifth Circuit vacated and remanded, holding that the set-off was improper because severance benefits are not wage payments and cannot be used to offset FLSA wage claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether severance benefits may be set-off against an FLSA wage claim | Martin argues set-off of severance benefits is improper against wages. | Pepsi argues Singer allows set-off so long as wages are not reduced below minimum. | Set-off of severance benefits against FLSA wages is improper. |
| Whether Singer and Gagnon permit set-offs in FLSA actions when benefits are not wage payments | Martin relies on Singer's context to permit offsets. | Pepsi contends Singer broadly allows offsets unless sub-minimum wages result. | Gagnon clarifies Singer is narrow; offsets are disfavored when not wage-related; severance is not wage payment. |
Key Cases Cited
- Singer v. City of Waco, 324 F.3d 813 (5th Cir. 2003) (allowed a limited set-off where overpayments were pre-payments that did not reduce below minimum wage)
- Heard v. Brennan, 491 F.2d 1 (5th Cir. 1974) (set-offs/counterclaims in FLSA wage cases disfavored; not a collection mechanism)
- Gagnon v. United Technisource, Inc., 607 F.3d 1036 (5th Cir. 2010) (rejects broad Singer interpretation; offsets not allowed when not pre-paid wages)