4th Circuit: Overtime Calculation Method Approved

Employers who misclassify employees as exempt can pay the overtime premium of 50 percent for overtime hours worked rather than the standard one-and-a-half time pay rate, the 4th Circuit ruled Jan. 14 in Desmond v. PNGI Charles Town Gaming.

In Desmond, PNGI Charles Town Gaming (PNGI) was sued by three employees it had misclassified as exempt. The employees sought overtime back wages under the Fair Labor Standards Act. Although the parties agreed upon the hours each plaintiff worked, they disagreed about how to calculate the unpaid overtime. The employees argued that they should be paid 150 percent of their pay rate for all overtime hours worked, but PNGI insisted that, because the employees agreed their salaries were meant to cover all hours worked, the “straight time” was covered, and they were owed only an additional 50 percent of their pay rate for each hour of overtime.

On appeal, the 4th Circuit upheld the district judge’s ruling in favor of PGNI. Several circuits and the Department of Labor have endorsed the 50 percent premium for overtime pay in cases of mistaken employee classification.

5th Circuit: Court Questions Cap’s Constitutionality

On Jan. 19, the 5th Circuit affirmed a $2.8 million jury verdict in Learmonth v. Sears, Roebuck and Co.

Lisa Learmonth was involved in an accident with a Sears van that resulted in several broken bones and a head injury. She sued Sears, and a jury awarded her $4 million in compensatory damages,
$2.2 million of which was noneconomic damages. Although the district court denied Sears’ request for a new trial, it reduced the noneconomic award to $1 million in accordance with Mississippi’s noneconomic damages cap.

Both parties appealed. Sears appealed the district court’s denial of its motion for a new trial, and Learmonth challenged the constitutionality of the state’s statutory cap. The 5th Circuit panel denied Sears’ request on Feb. 10.

In response to Learmonth’s challenge, the panel wrote that, while the issue was an important one, there was no controlling decision from the state Supreme Court to which it could look. The court therefore certified the question of constitutionality of the $1 million noneconomic damages cap to the Supreme Court of Mississippi.

6th Circuit: Wrongful Termination Claim Pre-empted by NLRA

The National Labor Relations Act (NLRA) can pre-empt a supervisor’s wrongful termination claim, the 6th Circuit ruled Jan. 12 in Lewis v. Whirlpool Corporation.

Timothy Lewis brought a wrongful termination suit against his employer, Whirlpool Corporation, which he claims fired him for refusing to discharge employees for union activities when he was a supervisor. Lewis claimed that Whirlpool, which was non-union, asked him to “build a case” for the dismissal of two employees who had initiated pro-union activities, such as encouraging employees to wear pro-union shirts and meet with union representatives. When he refused, Lewis was transferred to a less desirable post and eventually fired, he alleges, in retaliation.

The district court dismissed the case based on lack of subject matter jurisdiction, agreeing with Whirlpool that the claim was pre-empted by the NLRA. On appeal, Lewis argued that, as a supervisor, he was not covered by the NLRA. The court disagreed, noting that, when terminated for refusing to commit unfair labor practices, a supervisor does have a viable NLRA claim. Additionally, the court found that Lewis not only could have filed a charge with the National Labor Relations Board, he did file a complaint, and he withdrew it when it became clear that it would be unsuccessful.

8th Circuit: State Pharmaceutical Claims Stand

Federal law does not pre-empt a patient’s claim that a pharmaceutical company breached its implied warranty of merchantability by failing to comply with federal regulations when manufacturing medications, the 8th Circuit ruled on Jan. 19 in LeFaivre v. KV Pharm. Co.

Allen LeFaivre brought a class action suit against KV Pharmaceutical Company (KV), claiming breach of implied warranty and violation of the Missouri Merchantability Practices Act when the company failed to manufacture its medication in compliance with federal regulations. KV argued that the claims didn’t establish private cause of action and instead stood only as claims of federal regulatory violations.

Although the district court ruled that LeFaivre’s state law claims were pre-empted by federal law, the 8th Circuit reversed on appeal and remanded the case. Finally, it found that Congressional intent indicated that federal law was not meant to pre-empt state claims involving prescription drugs. While Congress enacted express pre-emptions for medical devices, it neither enacted such pre-emptions nor provided federal redress for consumers with drug-related claims.