PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JOHN DESMOND; DANA
WITHERSPOON; M. LARRY SANDERS,
Plaintiffs-Appellants,
v.
No. 08-1216
PNGI CHARLES TOWN GAMING,
L.L.C., d/b/a Charles Town Races
& Slots,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of West Virginia, at Martinsburg.
John Preston Bailey, Chief District Judge.
(3:06-cv-00128-JPB; 3:06-cv-00129-JPB;
3:06-cv-00135-JPB)
Argued: March 24, 2009
Decided: April 30, 2009
Before DUNCAN and AGEE, Circuit Judges,
and David A. FABER, Senior United States District Judge
for the Southern District of West Virginia, sitting by
designation.
Reversed and remanded by published opinion. Judge Agee
wrote the opinion, in which Judge Duncan and Senior Judge
Faber joined.
2 DESMOND v. PNGI CHARLES TOWN GAMING
COUNSEL
ARGUED: Paul B. Weiss, MARTIN & SEIBERT, LC, Mar-
tinsburg, West Virginia, for Appellants. Brian Michael Peter-
son, BOWLES, RICE, MCDAVID, GRAFF & LOVE, PLLC,
Martinsburg, West Virginia, for Appellee. ON BRIEF:
Charles F. Printz, Jr., BOWLES, RICE, MCDAVID, GRAFF
& LOVE, PLLC, Martinsburg, West Virginia, for Appellee.
OPINION
AGEE, Circuit Judge:
John Desmond, Dana Witherspoon, and M. Larry Sanders
(collectively "the Former Employees") appeal from the award
of summary judgment to their former employer, PNGI
Charles Town Gaming, L.L.C., d/b/a Charles Town Races &
Slots ("Charles Town Gaming"). The district court held the
Former Employees were barred as a matter of law from recov-
ering unpaid overtime compensation under the Fair Labor
Standards Act ("FLSA"), 29 U.S.C. §§ 201, et seq. (2000),
because they held administrative positions and were therefore
exempt employees. For the reasons set forth below, we
reverse the judgment of the district court.
I.
Charles Town Gaming operates a casino and live horse rac-
ing facility in Charles Town, West Virginia. The Former
Employees worked for Charles Town Gaming in a non-
supervisory position denominated as "Miscellaneous Racing
Official," which we will refer to as "Racing Official." In the
performance of their work duties, each of the Former Employ-
ees assisted in various tasks associated with Charles Town
Gaming’s staging of live horse races. In the morning and on
non-race work days, Racing Officials assist with clerical
DESMOND v. PNGI CHARLES TOWN GAMING 3
duties in the secretaries’ office, including noting rider
changes, putting together the next day’s racing program, and
completing racing entries for the following day. Racing Offi-
cials, including the Former Employees, rotated work in four
roles: Placing Judge, Paddock Judge, Horse Identifier, and
Clerk of Scales during horse races. A Placing Judge "observ-
[es] races from start to finish and determine[s] the final out-
come using a viper computer system and photo finish systems
. . . ."1 J.A. 69, 149-50, 216; see also W. Va. Code R. § 178-
1-13 (2009). The Paddock Judge
observ[es] the horses in the paddock prior to the run-
ning of a race, [ ] ensure[s] the horses are wearing
the proper equipment for racing [and that] a respon-
sible trainer or groom is in the paddock to saddle the
horse and prepare it for the race. The Paddock Judge
is also involved in seeing that a published workout
is in the program or announced if [it is] not available
by press time.
J.A. 69, 150, 215; see also W. Va. Code R. § 178-1-14
(2009). The Horse Identifier is "responsible for foal papers,
Coggins test results, and tattoos insuring the correct horse is
running in any given race. The [Horse] Identifier goes to the
paddock at race time and checks each horse’s tattoo." J.A. 69,
152, 215; see also W. Va. Code R. § 178-1-20 (2009). The
Clerk of Scales "works in the jockeys’ room prior to and after
each horse race and verifies each jockey’s presence and licen-
sure, [as well as the jockey’s weight] before and after each
race . . . ." J.A. 216, 150-52; see also W. Va. Code R. § 178-
1-17 (2009).
In September 2006, Charles Town Gaming terminated the
Former Employees’ employment due to "[g]ross violation of
1
Three Racing Officials served as Placing Judges at each race, as
required by West Virginia racing law. See W. Va. Code R. § 178-1-9.1
(2009).
4 DESMOND v. PNGI CHARLES TOWN GAMING
procedures" after they unanimously posted an incorrect order
of finish for a horse race. J.A. 254-56. The Former Employees
subsequently filed separate complaints in the District Court
for the Northern District of West Virginia alleging they "rou-
tinely" worked in excess of forty hours per work-week, but
were not paid for the overtime part of that work as required
by the FLSA. The cases were consolidated and the parties
filed cross motions for summary judgment.
The district court granted Charles Town Gaming’s motion
for summary judgment, holding the position of Racing Offi-
cial met the requirements for an administrative exemption
under the FLSA. Desmond v. PNGI Charles Town Gaming,
LLC, No. 3:06-cv-00128-JPB, slip op. at 1-2 (N.D.W. Va.
Jan. 14, 2008). The Court determined that the Racing Offi-
cial’s "primary duty" entailed non-clerical, non-manual work
related to Charles Town Gaming’s production of live horse
races, id. at 9-11, and those duties were "directly related to the
management or general business operations of" Charles Town
Gaming. Id. at 11-13. In reaching this conclusion, the court
relied on the fact that West Virginia law "require[s] and regu-
late[s]" the Racing Official’s position, and therefore is "criti-
cal for [Charles Town Gaming] to be able to conduct its
business, [as Charles Town Gaming] could not conduct its
business legally without them." Id. at 11. In addition, it noted
that Racing Officials "are involved in" work functions identi-
fied in 29 C.F.R. § 541.201(b) as related to the general busi-
ness operations of an employer, including quality control,
safety and health, public relations, and legal and regulatory
compliance. Id. at 12. Lastly, the district court held that the
Racing Officials exercised discretion and independent judg-
ment in matters of consequence to Charles Town Gaming.
Among the factors identified by the district court were a Rac-
ing Official’s responsibility to correctly identify the order of
finish after comparing and evaluating the merits of any chal-
lenges to the initial posting, the authority to commit Charles
Town Gaming "in matters that have significant financial
impact," and the duty to check and ensure compliance with
DESMOND v. PNGI CHARLES TOWN GAMING 5
numerous regulations related to the jockeys and horses partic-
ipating in the races. Id. at 14-16; cf. 29 C.F.R. § 541.202(b)
(2009).
The Former Employees noted a timely appeal, and we have
jurisdiction pursuant to 28 U.S.C. § 1291 (2000).
II.
We review an award of summary judgment de novo. Hawk-
spere Shipping Co. v. Intamex, S.A., 330 F.3d 225, 232 (4th
Cir. 2003). Summary judgment is only appropriate "if the
pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(c). We construe the evi-
dence in the light most favorable to the Former Employees,
the parties opposing Charles Town Gaming’s summary judg-
ment motion, and draw all reasonable inferences in their
favor. Hill v. Lockheed Martin Logistics Mgmt., Inc., 354 F.3d
277, 283 (4th Cir. 2004) (en banc).
III.
The FLSA requires that certain employees be paid at time
and a half for work over forty hours a week. 29 U.S.C.
§ 207(a)(1) (2009). Among the employees exempt from this
overtime pay requirement are persons "employed in a bona
fide executive, administrative, or professional capacity" ("the
administrative exemption"). § 213(a)(1) (2009). The Secretary
of Labor has adopted regulations that set forth a three-part test2
for determining whether an employee is subject to the admin-
2
Effective August 23, 2004, the regulations were amended from a previ-
ous long and short test for the exemption; the amended regulations are
applicable to this case. The amendments were not designed to significantly
change the criteria for the exemption. See Darveau v. Detecon, Inc., 515
F.3d 334, 338 (4th Cir. 2008).
6 DESMOND v. PNGI CHARLES TOWN GAMING
istrative exemption: (1) the employee must be compensated at
a salary rate of not less than $455 per week; (2) the employ-
ee’s primary duty must consist of "the performance of office
or non-manual work directly related to the management or
general business operations of the employer or the employer’s
customers"; and (3) the employee’s primary duty must "in-
clude[ ] the exercise of discretion and independent judgment
with respect to matters of significance." 29 C.F.R. § 541.200
(2009).
Charles Town Gaming bore the burden of proving, by clear
and convincing evidence, see Shockley v. City of Newport
News, 997 F.2d 18, 21 (4th Cir. 1993), that the Former
Employees’ jobs fell within the administrative exemption.3
See Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190
(1966); Clark v. J.M. Benson Co., 789 F.2d 282, 286 (4th Cir.
1986). FLSA exemptions are to be "narrowly construed
against the employers seeking to assert them and their appli-
cation limited to those establishments plainly and unmistak-
ably within [the exemptions’] terms and spirit." Arnold v. Ben
Kanowsky, Inc., 361 U.S. 388, 392 (1960).
On appeal, the Former Employees contend the district court
erred in awarding summary judgment to Charles Town Gam-
ing because the position of Racing Official does not satisfy
the second and third parts of the regulatory test.4 As to the
3
Charles Town Gaming contends that the burden of proof should only
be a preponderance of the evidence and cites case law from other jurisdic-
tions, including the Court of Appeals for the Seventh Circuit, to support
this assertion. See Yi v. Sterling Collision Ctrs., Inc., 480 F.3d 505, 506-
08 (7th Cir. 2007). In Shockley v. City of Newport News, this Court
unequivocally held that the proper standard is clear and convincing evi-
dence. 997 F.2d at 21 ("Employers must prove by clear and convincing
evidence that an employee qualifies for exemption" under 29 U.S.C.
§ 213(a)(1)). A panel cannot overrule the decision of a prior panel, The
Scotts Co. v. United Indus. Corp., 315 F.3d 264, 271 n.2 (4th Cir. 2002),
so we do not entertain the merits of Charles Town Gaming’s argument
regarding the proper burden of proof.
4
The parties agree the Former Employees fit within the first part of the
test based on a weekly salary exceeding $455.
DESMOND v. PNGI CHARLES TOWN GAMING 7
second requirement, the Former Employees assert the district
court erred in relying on the legal "significance or necessity
of an employee’s position" in determining whether the posi-
tion is "directly related to the management or general business
operations of the employer." Appellants’ Br. 15. The Former
Employees also contend the district court misapplied the pro-
visions of 29 C.F.R. § 541.201(b) by "parsing [its] literal
nuances" to a Racing Official’s duties without considering
"whether such an application is consistent with the original
Congressional intent" of the administrative exemption. Appel-
lants’ Br. 16-17. Lastly, they assert the "production/staff"
dichotomy analysis contained in 29 C.F.R. § 541.201(a) con-
tradicts the district court’s holding because Racing Officials
"are entirely involved in staging [the] product [of live horse
racing contests and] have nothing to do with the operation of
the business itself . . . ."5 Appellants’ Br. 17-19.
We agree that the district court erred in holding the position
of Racing Official satisfied the requirement that the Former
Employees’ primary duty was "directly related to [the] gen-
eral business operations of the employer." In reaching its con-
clusion, the district court improperly relied on the "critical"
role of the Racing Official in that Charles Town Gaming
"could not conduct its business legally without them." Des-
mond, slip op. at 11. However, the indispensability of an
employee’s position within the business cannot be the ratio
decidendi for determining whether the position is directly
related to the employer’s general business operations. As we
stated in Clark v. J.M. Benson Co.:
[Appellee] presses the district court’s conclusion that
5
On appeal, the Former Employees do not contest the district court’s
conclusion that the "primary duty" of the Racing Officials consisted of the
work they performed during the horse races as Placing Judge, Paddock
Judge, Horse Identifier, or Clerk of Scales. Accordingly, our review is
limited to whether those particular roles are directly related to Charles
Town Gaming’s general business operations.
8 DESMOND v. PNGI CHARLES TOWN GAMING
[she] was an "indispensable" employee, and for this
reason, that her primary duty was "directly related to
management policies or general business opera-
tions." But while [Appellee] may have held an indis-
pensable position because she represented the entire
accounting department, this fact is insufficient to
prove that her primary duty was administrative as a
matter of law. Certainly secretaries and clerks, where
a business employs only one, may be "indispens-
able." Yet the regulations generally exclude those
"run-of-the-mine" jobs from administrative classifi-
cation. The regulations emphasize the nature of the
work, not its ultimate consequence. Thus, Clark’s
apparent indispensability does not obviate the need
to prove independently that [her primary duty] is "di-
rectly related to management policies or general
business operations."
789 F.2d at 287 (footnote omitted).
The same principle applies in the case at bar. That the posi-
tion of Racing Official was "indispensable" because of state
law, rather than business practice, does not alter the analysis.
State or local law may also require a construction company to
post a flagman around a highway work site in order to coordi-
nate traffic, but no colorable argument can be made that the
flagman’s work is directly related to the construction compa-
ny’s general business operations. Looking to the "signifi-
cance" or "indispensability" of a position within a company’s
business operations diverts attention from the requisite
inquiry. Both the FLSA and its regulations make clear that an
employee is exempt based on the type of work performed by
that individual, not whether business practice or applicable
law require a particular position to exist. Therefore, the dis-
trict court erred in holding that the Former Employees’ work
was directly related to Charles Town Gaming’s business oper-
ations because that work was necessary in order for the com-
pany to operate lawfully.
DESMOND v. PNGI CHARLES TOWN GAMING 9
The applicable FLSA regulations provide further guidance
in determining whether an employment position satisfies the
administrative exemption requirement:
The phrase "directly related to the management of
general business operations" refers to the type of
work performed by the employee. To meet this
requirement, an employee must perform work
directly related to assisting with the running or ser-
vicing of the business, as distinguished, for example,
from working on a manufacturing production line or
selling a product in a retail or service establishment.
[Such work] includes, but is not limited to, work
in functional areas such as tax; finance; accounting;
budgeting; auditing; insurance; quality control; pur-
chasing; procurement; advertising; marketing;
research; safety and health; personnel management;
human resources; employee benefits; labor relations;
public relations, government relations; computer net-
work, internet and database administration; legal and
regulatory compliance; and similar activities. . . .
29 C.F.R. § 541.201(a)-(b).
We have previously analyzed whether a particular position
was directly related to the general business operations of an
employer. In Shockley, we held one employee’s duties satis-
fied this requirement because she investigated complaints
against other officers, analyzed the relevant facts, interpreted
department policy, and recommended a course of action that
was usually followed. 997 F.2d at 28. Because the employee
"spent all her time accumulating and analyzing data and mak-
ing recommendations that shaped the police department’s pol-
icy with regard to internal discipline[, her work was] ‘directly
related to management policies.’" Id.
In West v. Anne Arundel County, 137 F.3d 752 (4th Cir.
1998), we held an EMS Training Lieutenant’s position was
10 DESMOND v. PNGI CHARLES TOWN GAMING
directly related to the operation of the EMS Division because
the Lieutenant "develop[ed], coordinate[d], implement[ed,]
and conduct[ed] EMS training programs[;] prepare[d] lesson
plans and training aids[;] supervise[d] delivery of training and
tests[;] and evaluate[d] new equipment." Id. at 764.
More recently, in Darveau v. Detecon, Inc., we held that
Darveau, an "inside salesman" for Detecon, met the criteria
for the administrative exemption. 515 F.3d at 339. Darveau
approached current and potential clients, discerned their
needs, and relayed that information to Detecon’s technical
staff, who then created a tailored package of services that
Darveau integrated into a formal proposal. Id. Darveau was a
member of Detecon’s "Executive Team" and "helped to shape
Detecon’s general business policies . . . by proposing revi-
sions to Detecon’s travel and expense policy [and] work[ing]
closely . . . in hiring two additional directors of sales." Id. We
concluded that Darveau’s "significant role in conducting both
specific sales and shaping Detecon’s more general market
strategy, as well as his participation in the company’s overall
management and hiring policy [was] wholly unlike the ‘rou-
tine selling efforts focused simply on particular sales transac-
tions’" of a non-exempt wholesale salesperson. Id.
In contrast to the duties of these exempt employees in
Shockeley, West, and Darveau, the Former Employees’ work
was not directly related to the general business operations of
Charles Town Gaming. During the horse races, Racing Offi-
cials fulfilled one of several roles, which required them to
observe and examine the horses, the jockeys, the trainers or
grooms, the relevant paperwork for the horses, the order of
finish for the race, or the paperwork associated with any sub-
sequent claims. Racing Officials have no supervisory respon-
sibility and do not develop, review, evaluate, or recommend
Charles Town Gaming’s business policies or strategies with
regard to the horse races. Simply put, the Former Employees’
work did not entail the administration of – the "running or ser-
vicing of" – Charles Town Gaming’s business of staging live
DESMOND v. PNGI CHARLES TOWN GAMING 11
horse races. The Former Employees were not part of "the
management" of Charles Town Gaming and did not run or
service the "general business operations." While serving as a
Placing Judge, Paddock Judge, or performing similar duties is
important to the operation of the racing business of Charles
Town Gaming, those positions are unrelated to management
or the general business functions of the company.
Instead, a Racing Official’s work consisted of tasks some-
what similar to those performed "on a manufacturing produc-
tion line or selling a product in a retail or service
establishment." Cf. 29 C.F.R. § 541.201(a). Although the
administrative-production dichotomy is an imperfect analyti-
cal tool in a service-oriented employment context, it is still a
useful construct. Other Circuit Courts of Appeal have adopted
and modified its logic to less traditional "production" situa-
tions:
[A]pplying the administrative-production dichotomy
is not as simple as drawing the line between white-
collar and blue-collar workers. On the contrary, non-
manufacturing employees can be considered "pro-
duction" employees in those instances where their
job is to generate (i.e., "produce") the very product
or service that the employer’s business offers to the
public. See, e.g., Reich v. New York, 3 F.3d 581,
587-89 (2d Cir. 1993) (police investigators conduct
or "produce" criminal investigations); Dalheim v.
KDFW-TV, 928 F.2d 1220, 1230-31 (5th Cir. 1990)
(television station’s producers, directors, and assign-
ment editors "produced" newscast, and were thus
non-exempt).
Reich v. John Alden Life Ins. Co., 126 F.3d 1, 9 (1st Cir.
1997).
As relevant here, Charles Town Gaming "produces" live
horse races. The position of Racing Official consists of "the
12 DESMOND v. PNGI CHARLES TOWN GAMING
day-to-day carrying out of [Charles Town Gaming’s] affairs"
to the public, a production-side role. See Bratt v. County of
Los Angeles, 912 F.2d 1066, 1070 (9th Cir. 1990), cited with
approval in Shockley, 997 F.2d at 29. Because a Racing Offi-
cial’s duties are not directly related to the general business
operations of Charles Town Gaming, the position does not
satisfy the requirements for the administrative exemption
under the FLSA.6
Accordingly, the district court erred in awarding summary
judgment to Charles Town Gaming.
IV.
For the foregoing reasons, we reverse the judgment of the
district court, and remand for further proceedings consistent
with this opinion.
REVERSED AND REMANDED
6
In light of our disposition of this issue, and because the administrative
exemption only applies if all three parts of the test are satisfied, we need
not consider whether the district court also erred in holding that the posi-
tion of Racing Official satisfied the requirement of exercising discretion
and independent judgment.