Appeals court affirms Charles Town overtime ruling

RICHMOND, Va. -- A federal appeals court, in a ruling last week, affirmed a lower court's method of computing unpaid overtime compensation in the case of three former Charles Town Gaming employees.

The 4th U.S. Circuit Court of Appeals, in its 15-page opinion, released on Friday, also vacated the lower court's judgment as to willfulness and remanded the case on that issue.

The former employees -- John Desmond, M. Larry Sanders and Dana Witherspoon -- disputed how the U.S. District Court for the Northern District of West Virginia computed the overtime under the Fair Labor Standards Act, or FLSA.

Previously, in 2009, the Richmond-based appeals court had ruled the three employees were not managers and were entitled to overtime.

The case then went back to a Martinsburg judge to decide the correct overtime rate.

James C. Dever, III, a U.S. District judge for the Eastern District of North Carolina, who sat by designation, wrote in Friday's opinion that the parties "specifically disagreed" over whether the former employees should receive 150 percent of the regular rate for all hours worked over 40 in a given workweek or 50 percent of the regular rate for all hours worked over 40 in a given workweek.

The federal appeals court, in its ruling, noted that four sister circuits have already addressed the issue.

"The First, Fifth, Seventh and Tenth Circuits all have determined that a 50 percent overtime premium was appropriate in calculating unpaid overtime compensation under 29 U.S.C. § 216(b) in mistaken exemption classification cases, so long as the employer and employee had a mutual understanding that the fixed weekly salary was compensation for all hours worked each workweek and the salary provided compensation at a rate not less than the minimum wage for every hour worked," it wrote.

In addition, the appeals court wrote that the U.S. Department of Labor also has approved using a 50 percent overtime premium to calculate unpaid overtime compensation in a mistaken exemption classification case.

The appeals court determined that the district court "correctly concluded" how to calculate unpaid overtime compensation.

"Here, the former employees agreed to receive straight time pay for all hours worked in a given workweek and have already received such pay," the appeals court wrote. "Thus, the 'loss suffered' is the 50 percent premium for their overtime hours."

Charles Town Gaming, in its cross-appeal, disputed the district court's decision to grant summary judgment to the former employees as to whether the racetrack's FLSA violation was willful.

Whether a violation is "willful" impacts the length of the appropriate limitations period under the FLSA, and it can impact the computation of unpaid overtime compensation under the act.

The appeals court said the former employees had to demonstrate "an absence of a genuine issue of material fact" on the willfulness issue.

In support, the former employees argued that the racetrack "willfully ignored" their own official job descriptions.

The district court had relied on this evidence in granting summary judgment to the three men.

In opposition, Charles Town Gaming pointed to the district court's first summary judgment order.

In the order, the district court observed that the racetrack's personnel testified that the FLSA designation on the former employees' job descriptions was incorrectly created by a computer program -- that it was a "typographical error."

"When the evidence is viewed in the light most favorable to Charles Town Gaming, a genuine issue of material fact exists as to willfulness," the appeals court wrote in its ruling.

Therefore, the district court, it said, "erred" in entering summary judgment on the issue of willfulness.