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.
COUNSEL

ARGUED: Paul B. Weiss, MARTIN & SEIBERT, LC, Martinsburg, West Virginia, for Appellants. Brian Michael Peterson, 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 recovering 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 racing facility in Charles Town, West Virginia. The Former

Employees worked for Charles Town Gaming in a nonsupervisory 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 Employees 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

2 DESMOND v. PNGI CHARLES TOWN GAMING
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 Officials, 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 outcome 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 running of a race, [ ] ensure[s] the horses are wearing

the proper equipment for racing [and that] a responsible 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 licensure, [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

1Three 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). 

DESMOND v. PNGI CHARLES TOWN GAMING 3
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 "routinely" 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 Official 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 Official’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 regulate[s]" the Racing Official’s position, and therefore is "critical 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 identified in 29 C.F.R. § 541.201(b) as related to the general business 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 judgment in matters of consequence to Charles Town Gaming.

Among the factors identified by the district court were a Racing Official’s responsibility to correctly identify the order of

finish after comparing and evaluating the merits of any challenges 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

4 DESMOND v. PNGI CHARLES TOWN GAMING
numerous regulations related to the jockeys and horses participating 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. Hawkspere 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 evidence in the light most favorable to the Former Employees,

the parties opposing Charles Town Gaming’s summary judgment 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 admin2Effective August 23, 2004, the regulations were amended from a previous 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). 

DESMOND v. PNGI CHARLES TOWN GAMING 5
istrative exemption: (1) the employee must be compensated at

a salary rate of not less than $455 per week; (2) the employee’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 "include[ ] 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 application limited to those establishments plainly and unmistakably 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 Gaming because the position of Racing Official does not satisfy

the second and third parts of the regulatory test.4 As to the

3Charles Town Gaming contends that the burden of proof should only

be a preponderance of the evidence and cites case law from other jurisdictions, 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 evidence. 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. 

4The parties agree the Former Employees fit within the first part of the

test based on a weekly salary exceeding $455. 

6 DESMOND v. PNGI CHARLES TOWN GAMING
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 position 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 provisions 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. Appellants’ Br. 16-17. Lastly, they assert the "production/staff"

dichotomy analysis contained in 29 C.F.R. § 541.201(a) contradicts 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] general business operations of the employer." In reaching its conclusion, 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." Desmond, 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

5On 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. 

DESMOND v. PNGI CHARLES TOWN GAMING 7
[she] was an "indispensable" employee, and for this

reason, that her primary duty was "directly related to

management policies or general business operations." But while [Appellee] may have held an indispensable 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 "indispensable." Yet the regulations generally exclude those

"run-of-the-mine" jobs from administrative classification. 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 "directly 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 position 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 coordinate traffic, but no colorable argument can be made that the

flagman’s work is directly related to the construction company’s general business operations. Looking to the "significance" 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 district court erred in holding that the Former Employees’ work

was directly related to Charles Town Gaming’s business operations because that work was necessary in order for the company to operate lawfully. 

8 DESMOND v. PNGI CHARLES TOWN GAMING
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 servicing 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; purchasing; procurement; advertising; marketing;

research; safety and health; personnel management;

human resources; employee benefits; labor relations;

public relations, government relations; computer network, 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 satisfied 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 making recommendations that shaped the police department’s policy 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

DESMOND v. PNGI CHARLES TOWN GAMING 9
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 revisions 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 ‘routine selling efforts focused simply on particular sales transactions’" 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 Officials 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 subsequent claims. Racing Officials have no supervisory responsibility 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 servicing of" – Charles Town Gaming’s business of staging live

10 DESMOND v. PNGI CHARLES TOWN GAMING
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 somewhat similar to those performed "on a manufacturing production 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 analytical 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" situations:

[A]pplying the administrative-production dichotomy

is not as simple as drawing the line between whitecollar and blue-collar workers. On the contrary, nonmanufacturing employees can be considered "production" 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 assignment 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

DESMOND v. PNGI CHARLES TOWN GAMING 11
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 Official’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 position of Racing Official satisfied the requirement of exercising discretion

and independent judgment. 

12 DESMOND v. PNGI CHARLES TOWN GAMING