Hale v. KTG USA, Inc.

A recent decision out of the Northern District of Mississippi underscores that courts do not look favorably upon what appear to be retaliatory counterclaims, asserted by defendant-employers in the context of FLSA claims. In Hale v. KTG USA, Inc., the individual defendant filed a counterclaim in response to the plaintiff’s FLSA claims, asserting that the FLSA claims had negligently inflicted emotional distress on him and/or interfered with his business relations. On the plaintiff’s motion, the court dismissed counterclaims relying on well-settled Fifth Circuit authority which typically does not allow such counterclaims.

Background

Plaintiff Dameon Hale alleged he worked as many as 60 to 80 hours per week in KTG’s shipping yard from April 2023 to November 2024 without receiving overtime pay as required under the FLSA. He named both KTG and Robert L. Ruth, Jr., doing business as RBT Transportation, as his employers and defendants in the action. In response, Ruth filed a counterclaim accusing Hale of negligent infliction of emotional distress and interference with business relations, alleging the filing of the FLSA suit against KTG caused him personal harm and risked his business ties with the company. Hale moved to dismiss. 

The Court’s Analysis

The court characterized Hale’s motion as a facial Rule 12(b)(1) jurisdictional attack and found Ruth’s claims squarely barred under Fifth Circuit precedent. The Fifth Circuit has long prohibited employer counterclaims in FLSA cases where those claims function as set-offs or seek damages against employees, citing Brennan v. Heard and subsequent reaffirmations such as Martin v. PepsiAmericas. The rationale is policy-driven: FLSA proceedings should focus narrowly on employer compliance with minimum wage and overtime rules, not devolve into collateral disputes about employer-employee grievances. 

Although Ruth argued his claims were “compulsory” because they arose from the same transaction, the court disagreed. Even if jurisdiction could theoretically exist, the court declined to exercise supplemental jurisdiction under § 1367(c)(4), pointing to Fifth Circuit precedent rejecting such counterclaims as fundamentally inconsistent with the purpose of the Act. 

Takeaways for Practitioners

This decision reinforces what most of us practicing in this space already know: employer counterclaims in FLSA cases are typically not well-received by courts, absent the extremely narrow “set-off” exception where the employer is acknowledging and crediting previously paid wages. This ruling is useful when opposing retaliatory counterclaims designed to intimidate plaintiffs. It’s also a strong reminder to defense counsel—pursuing unrelated tort claims against an FLSA plaintiff in federal court is typically a losing strategy.

Click Hale v. KTG USA, Inc. to read the entire decision.