E-Alert Case Updates

Employees Get Paid Under FLSA when Employer Mistakenly Classifies them as Exempt

Desmond v. PNGI Charles Town Gaming
No. 09-2189 (4th Cir. 2011)
By Colleen K. O’Brien, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Former employees of Charles Town Gaming initiated a lawsuit against their employer under the Fair Labor Standards Act (“FLSA”) for unpaid overtime compensation. The lawsuit arose because the employer erroneously categorized the employees as exempt under the FLSA, and paid them salaries rather than a per diem wage. Consequently, the employees, who often worked more than 40 hours per week, were never paid the overtime compensation to which they were allegedly entitled.

On appeal, the employees disputed the calculation method of the unpaid overtime compensation under 29 U.S.C. § 216(b), and the employer disputed the District Court’s decision to grant summary judgment on the issue of willful violation. The appellate court affirmed the calculation of the unpaid overtime wages, but vacated the District Court’s decision on the issue of willfulness.

The employees argued that the unpaid overtime wages should have been paid at a 150 percent premium of the regular weekly rate, and the employer argued that a 50 percent premium applied. The District Court agreed with the employer, and relied on Overnight Motor Transportation Co. v. Missel, 315 U.S. 572 (1942), to rule that the employees should be compensated at a 50 percent premium of the regular weekly rate. In so holding, the Court aligned itself with the First, Fifth, Seventh, and Tenth Circuits who all have determined that the 50 percent overtime premium applies.

The second issue was whether the employer willfully violated the FLSA. Whether the violation was willful affects the statute of limitations (if the violation is willful, the three year statute of limitations applies, but if the violation is not willful, the two year statute of limitations applies). An employer willfully violates the FLSA if it either “knows” or shows “reckless disregard” for its conduct vis-à-vis FLSA compliance.

The District Court found that the employer’s violation of the FLSA was willful as a matter of law, but the appellate court disagreed. When the appellate court viewed all the evidence in the light most favorable to the non-moving party, who here was the employer, there was a genuine issue of material fact regarding willful conduct. The evidence showed that the FLSA designation was a typographical error, which indicated mere negligence. The Court could not find that, as a matter of law, the employer acted willfully. As a result, the case was affirmed in part, and vacated and remanded in part.