FOURTH CIRCUIT CLARIFIES CALCULATION OF FLSA DAMAGES

Over the last several years, wage and hour claims have been among the most popular for labor and employment lawyers all over the nation. Recently, West Virginia took center stage in one of those disputes.

John Desmond and Dana Witherspoon got fired from their jobs at the Charles Town race track for announcing that the wrong dog had won a race. After their discharges, Desmond and Witherspoon filed a lawsuit against their former employer, Charles Town Gaming, LLC, alleging that they had been misclassified as being exempt from the wage and hour provisions of the Fair Labor Standards Act (FLSA). They contended that that because they were non-exempt employees covered by the FLSA, they should have been getting overtime pay, which they never received.

While the United States District Court for the Northern District of West Virginia ruled that Desmond and Witherspoon were covered by the FLSA and therefore entitled to overtime pay at one and one-half times their regular rates for all hours worked over 40 hours in a week, it wasn’t quite as clear just exactly how to calculate what Charles Town Gaming owed Desmond and Witherspoon in order to compensate them for the overtime pay they should have received. The parties disagreed on whether Desmond’s and Witherspoon’s regular hourly rates should be multiplied by .5, or rather 1.5, for each hour they worked over 40 hours in a week.

Desmond and Witherspoon argued that their salaries were paid for working just 40 hours per week, and therefore, they earned neither their regular pay, nor overtime pay, for all the hours they worked above 40. Therefore, in order to be fully compensated, they reasoned that they must receive 1.5 times their regular rate for each hour worked above 40 hours. Charles Town Gaming, meanwhile, contended that the salaries it paid to Desmond and Witherspoon applied to all hours which they worked. According to them, all that was needed in order to fully compensate Desmond and Witherspoon for hours worked above 40 was to pay them an additional .5 times their regular rate, and the District Court felt the same way.

On appeal, the United States Court of Appeals for the Fourth Circuit – which covers West Virginia – agreed that Charles Town Gaming had the better argument, finding that, based on the unique facts of the case, the salaries paid to Desmond and Witherspoon applied to all hours which they worked, not just those hours up to 40 hours in a given week. Thus, the Court concluded that the District Court’s decision to pay Desmond and Witherspoon .5 times their regular rates for each hour worked above 40 hours was the right call.

This decision is at least a step towards a reasonable approach to calculating FLSA damages in West Virginia. However, because the Appeals Court pointed to the evidence showing that there was an understanding between Desmond, Witherspoon, and Charles Town Gaming to the effect that their salaries covered all hours worked, optimism should remain tempered. After all, absent that evidence, the result might very well have been different. In the meantime, employers would be wise to take their cue from the 4th Circuit and be clear with salaried employees that their salaries are for all hours worked, and that they are not therefore entitled to additional pay for hours worked over 40 in a week.

“Jack” Merinar is the leader of the firm’s NLRA team. He got his introduction to labor law in the early 1990’s seeking injunctions of picket line misconduct and handling arbitrations. By the mid 1990’s he was advising employers through union campaigns and elections. His experience with campaigns led Jack to develop a focus on advising employers how to avoid campaigns where possible.
 
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» Read the full biography of John R. Merinar, Jr. at Steptoe & Johnson

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