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BROCK v. CLARIDGE HOTEL & CASINO

January 9, 1989

WILLIAM E. BROCK, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, Plaintiff,
v.
THE CLARIDGE HOTEL AND CASINO, Defendant



The opinion of the court was delivered by: COHEN

 This case, originally instituted before us by the Secretary of Labor, comes back to us on remand from the Third Circuit, 846 F.2d 180 (1988), after a denial of certiorari by the Supreme Court, sub. nom. Claridge Hotel and Casino v. McLaughlin, 488 U.S. 925, 109 S. Ct. 307, 102 L. Ed. 2d 326 (1988), for a clarification of one aspect of our previous opinion. See 664 F. Supp. 899 (D.N.J. 1986). The Third Circuit has remanded the issue of whether the defendant, The Claridge Hotel and Casino ("The Claridge"), could have reasonably believed that its minimum guarantee pay plan *fn1" ("plan") complied with the provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 213(a)(1), 216(b) and the regulations promulgated thereunder, 29 C.F.R. § 541 et. seq.; and whether the defendant acted intentionally, or with reckless disregard of the terms of the agreement, in violation of the plan and in contravention of the FLSA.

 I. Factual Background

 Gambling on a big infusion into a dying coastline, the New Jersey State Legislature cleared the way for gambling casinos to be constructed at the seashore by passing the 1976 amendment to the New Jersey Constitution, Article 4, § 7, para. 2, which added subparagraph (D) establishing the lawfulness of gambling in Atlantic County. N.J.S.A. Const. Art. 4, § 7, par. 2 (West 1988). Soon thereafter, a number of casinos opened in Atlantic City, including The Claridge which opened in approximately June of 1981. The Claridge operates a gaming casino which is licensed by the New Jersey Casino Commission, and provides a full fare of games of chance such as baccarat, blackjack, craps, roulette and various denominations of slot machines. The Claridge employs three types of allegedly "supervisory" employees for work at the gaming tables, called boxpersons, floorpersons and pit bosses. See, 664 F. Supp. at 901; 846 F.2d at 181-82.

 The issue on remand involves the minimum guarantee pay plan established by The Claridge for these employees so that they could properly be treated as supervisors as contemplated by the FLSA, 29 U.S.C. § 213(a)(1); 29 C.F.R. § 541.1, and be exempted from the time and one-half for overtime provisions of that statute. The plan was set up in an attempt to comply specifically with 29 C.F.R. § 541.119(a), a special "upset" proviso for high salaried executives, which states that:

 
(a) Except as otherwise noted in paragraph (b) of this section, § 541.1 contains an upset or high salary proviso for managerial employees who are compensated on a salary basis at a rate of not less than $ 250 per week exclusive of board, lodging, or other facilities. Such a highly paid employee is deemed to meet all the requirements in paragraphs (a) through (f) of § 541.1 if the employee's primary duty consists of the management of the enterprise in which employed or of a customarily recognized department or subdivision thereof and includes the customary and regular direction of the work of two or more other employees therein. If an employee qualifies for exemption under this proviso, it is not necessary to test that employee's qualifications in detail under paragraphs (a) through (f) of § 541.1 of this part.

 Every boxperson, floorperson and pit boss was given a one page contract known as a "Weekly Salary Guarantee" *fn2" to sign, and once executed the agreement was placed in the employee's file. The salary structure The Claridge represented to these employees was a flat base per eight hour day and then an hourly rate for any time over eight hours, calculated by dividing the base by eight hours. However, as we found before, defendant's attempt to characterize the payment plan as a salary was essentially illusory *fn3" and these "supervisory" employees were paid strictly on an hourly basis. 664 F. Supp. at 904. The Third Circuit agreed, 846 F.2d at 184-187. The only question before us on remand then is whether The Claridge could reasonably have believed that this plan was in compliance with the FLSA, such that liquidated damages were properly denied. We set forth with greater clarity below additional factual findings which support our conclusion that The Claridge could in good faith have felt it had reasonable grounds to believe the plan it established was not in violation of the FLSA, 29 U.S.C. § 260 so as not to be liable for liquidated damages which are otherwise required by 29 U.S.C. § 216(b).

 II. Supplemental Articulation of Findings

 In our prior opinion we found § 6(a) of the Portal-to-Portal Act, 29 U.S.C. § 255(a), to require a two-year statute of limitations rather than three years on plaintiff's claim for backwages because defendant's violation was not willful. We also decided that liquidated damages would not be assessed pursuant to 29 U.S.C. § 260 because we believed that The Claridge acted in "good faith and . . . had reasonable grounds for believing that [its] act or omission was not a violation of the Fair Labor Standards Act of 1938." 664 F. Supp. at 905. As we understand the Third Circuit, the case has been remanded for clarification of the factual basis upon which we relied to reach both of the above conclusions. Thus there is no need for any further record to be made by the parties; rather we rely on the trial record, briefs pre and post trial, affidavits submitted to this Court and our own trial notes.

 In McLaughlin v. Richland Shoe Company, 486 U.S. 128, 108 S. Ct. 1677, 100 L. Ed. 2d 115 (1988), the Supreme Court delineated the scope of the term "willful" for violations of the FLSA as the standard articulated in Transworld Airlines, Inc. v. Thurston, 469 U.S. 111, 83 L. Ed. 2d 523, 105 S. Ct. 613 (1985) which is:

 
a violation of the Act was "willful" if "the employer . . . knew or showed reckless disregard for the matter or whether its conduct was prohibited by the [FLSA]."

 469 U.S. at 126. We applied this same standard, following Brock v. Richland Shoe Co., 799 F.2d 80 (3d Cir. 1986), aff'd sub. nom. McLaughlin v. Richland Shoe Co., supra, in our previous opinion prior to the Supreme Court's affirmance. We are satisfied that we applied the correct standard, and we therefore only further articulate the factual findings to which we applied this legal standard.

 Pursuant to 29 U.S.C. § 255(a), if the employer's violation of the FLSA was willful, as determined by the above standard, then the employer is liable for three rather than the standard two years of backwages. We previously found that the Claridge had not willfully ...


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