## Facts

- The City of Two Rivers employed Christopher Heder as a firefighter.
- The City decided that its firefighters would become certified paramedics and entered a memorandum of agreement with the firefighters’ union addressing training time and compensation.
- The agreement provided a 3% wage increase for firefighters who obtained paramedic certification.
- The agreement also required a firefighter who left the City’s employment within three years to reimburse the City for the cost of paramedic training.
- The City’s arrangement treated portions of the required training time as paid during regular hours, paid at an overtime rate, and initially as unpaid “donated” time; after recognizing that required time could not be treated as donated under the FLSA, the City paid a reduced rate for that portion.
- Heder resigned about two and a half years after completing (or substantially completing) the training, within the three-year repayment window.
- To recover training costs, the City withheld all of Heder’s pay from his last two pay periods.
- Heder sued, alleging violations of the Fair Labor Standards Act (FLSA). The City counterclaimed to recover the remaining balance of the training costs.
- The City conceded it had to pay at least the FLSA minimum wage for the final pay periods.
- The district court treated the repayment provision as an invalid covenant not to compete under Wisconsin law and ruled for Heder; the City appealed.

## Issues

1. Whether mandatory paramedic-training time had to be treated as compensable work under the FLSA (including overtime treatment when applicable), rather than as unpaid “donated” time or paid at a reduced rate.
2. Whether the FLSA allowed the City to recoup training costs by withholding Heder’s final wages, and if so, only to what extent (given the FLSA’s minimum-wage and overtime protections).
3. Whether the training-cost repayment clause in the collective-bargaining agreement was invalid under Wisconsin law as a covenant not to compete (or otherwise unenforceable).

## Decision

- The Seventh Circuit held that required training time could not be treated as “donated” to avoid the FLSA; mandatory training is compensable work, and overtime rules apply when the training hours push total hours beyond the FLSA overtime threshold.
- The court held that the FLSA does not bar an employer from seeking repayment of training costs as such, but it does prevent an employer from using a deduction or setoff method that drives pay for a pay period below what the FLSA requires (including at least the statutory minimum wage, and any overtime due).
- The court rejected the district court’s view that the repayment obligation was an invalid covenant not to compete under Wisconsin law merely because it created a financial consequence for leaving before three years; it did not, by its terms, restrict Heder from working elsewhere.
- The court reversed the state-law invalidation of the repayment clause and remanded for further proceedings consistent with the limits the FLSA places on wage withholding and any permissible recovery.

## Legal Principles

- Time an employer requires an employee to spend in training is “work” under the FLSA and must be counted as compensable hours.
- When required training time causes total hours to exceed the applicable overtime threshold, the employer must satisfy the FLSA’s overtime requirements for those hours.
- The FLSA permits an employer to pursue repayment of employer-paid costs by contract or lawsuit, but it limits wage withholding and similar self-help methods: an employer may not reduce a worker’s pay for a pay period below the FLSA minimum wage (or avoid paying overtime required by the Act).
- Under Wisconsin law, a repayment-for-training provision is not treated as a covenant not to compete solely because it may discourage resignation; a noncompete analysis generally applies to terms that restrict post-employment work, not terms that allocate training costs.

## Conclusion

Heder v. City of Two Rivers held that mandatory paramedic-training time was compensable under the FLSA and could not be treated as “donated” to avoid wage-and-overtime rules; while the City could seek reimbursement of training expenses under its agreement, it could not do so by withholding final wages in a way that dropped Heder’s pay below what the FLSA requires, and the Seventh Circuit rejected the district court’s ruling that the repayment clause was invalid under Wisconsin noncompete law and remanded for further proceedings.


Heder v. City of Two Rivers, 295 F.3d 777 (2002)