A trio of former employees of a West Virginia race course sued for unpaid overtime, charging that they were misclassified. Each had the title of Miscellaneous Racing Official, a nonsupervisory job. The employer argued that because some of their duties were required by state law, they were “indispensable” to business operations and therefore exempt.

What happened. The three officials (and others) rotated among four race-day functions: The placing judge monitored and photographed horses at the finish line; the paddock judge verified each horse's equipment and a groom's readiness to saddle it for the race; the horse identifier checked tattoos to see that the proper racers were present; and the clerk of scales checked jockeys' identification and weights before each race. On days when no races were run, the officials performed clerical work.

The officials who sued PNGI Charles Town Gaming had all been fired at once; the employer said they had all misidentified the winner of a particular race. Their first round in court was before a federal district judge, who ruled against them. He agreed with Charles Town Gaming that West Virginia requires as a matter of state law that the officials' functions be performed, meaning that their duties were “directly related to the management or general business operations of the employer.”

That language, from the Federal Fair Labor Standards Act (FLSA) describes, in part, exempt administrative employees. The former officials appealed that ruling to the 4th Circuit, which covers Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

What the court said. Appellate judges disagreed with the district judge's reasoning. They wrote, “FLSA and its regulations make clear than 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.” The officials' jobs did not qualify them for administrative, professional, or executive exemption.

Judges drew the analogy of laws requiring a flagman to help direct traffic at a construction site. No one would say, they wrote in effect, that the flagman's job qualified as exempt work, despite its being required by law. So the officials' case was sent back to the district court for reconsideration. Desmond et al. v. PNGI Charles Town Gaming , U.S. Court of Appeals for the 4 th Circuit, No. 008-1216 (2009).

Point to remember: The employer here probably kept no time records of the officials' work. As a result, the lower court will have to rely on the officials' own records or estimates, and back overtime pay could be a big bill for the employer.

More Resources on Exempt vs Non-Exempt Employees

• FLSA Salary Basis Test: 3 Pitfalls to Avoid (News Article)
• Q&A: Pay Cuts, Exempt Employees, and the FLSA (News Article)
• Use Caution When Reclassifying Employees (White Paper)
• Flowchart for Determining Exemption Status