PROVIDENCE — With Twin River’s fate still hanging in the air, the owners of Rhode Island’s largest slot parlor have filed suit in federal court to block an arbitrator’s order to pay time-and-a-half to its employees on Sundays.

It is not entirely clear how much back pay is in dispute for the owners of the financially struggling greyhound track-and-slot parlor in Lincoln. Twin River defaulted last March on its loan payments for the acquisition and renovation of the former Lincoln Park that turned it into the “first-class casino” that it calls itself today.

But union lawyers have accused the owners of making a windfall profit from “almost a year of interest on [the] illegally withheld wages.” They have also asked the court to order the owners to post security for a disputed $145,000, saying: “If Twin River goes into bankruptcy, it could be years before employees are paid, if at all.”

Representatives of the state, the owners and the lenders group, led by Merrill Lynch Capital Corp., have been meeting privately since the last in a series of loan forbearance agreements lapsed on Jan. 5 to discuss an array of options, ranging from a forced descent into bankruptcy to a state takeover with the current owners remaining as operators.

The state’s stake in the outcome is huge: an anticipated $246 million this year alone from the Lottery-provided video-slot machines.

“The state’s advisers are in contact with the lenders’ advisers and all parties see the value of trying to work out a restructuring,” said Gary Sasse, who now doubles as director of the Departments of Revenue and Administration, when asked Thursday about the status of the negotiations.

Twin River spokeswoman Patti Doyle said the same day: “There is no change in the tenor and tone of discussions between the lenders and BLB. … Being out of forbearance could certainly trigger a bankruptcy since we no longer have forbearance protection, but … there has been no notification from lenders that the loan was being called which would signal the need for bankruptcy.”

In the interim, BLB Investors — the subsidiary of UTGR that owns Twin River — has gone to court to try to avert an additional employee expense that it tried to end at about the same time it fell behind on its loan payments.

In a complaint filed in U.S. District Court on Jan. 30, Twin River’s lawyer Michael D. Chittock of Adler Pollock & Sheehan argued the owners have no obligation to pay time-and-a-half to its Sunday employees under state law and contract.

The filing was precipitated by a grievance filed last March 20 by Local 334, the Service Employees International Union affiliate representing the “Gaming Department” clerks at Twin River.

After hearings last fall, arbitrator James S. Cooper decided Twin River’s March 8 announcement that it would no longer pay time-and-a-half to these employees was a contract violation, because the employees were then — and remain — “necessary persons.” On Jan. 22, he ordered Twin River to pay employees who work on Sunday at the rate of time-and-a-half of their regular pay and to make wages retroactive to March 9, 2008.

These are the people known as validators who “are able to cash a VLT ticket … make cash advances on a credit card and cash a personal check,” according to the arbitrator. It could not be determined yesterday how many people fall into this category, and how much they are owed in back pay.

Twin River argued that state law relieves the owners of any hotel, restaurant, resort or “recreational facility” from paying their Sunday employees time-and-a-half. The union cited another section of state law that says any corporation “receiving a permit from the division of racing and athletics of the Department of Business Regulation to conduct horse racing, dog-racing … shall compensate the necessary persons to conduct the event on Sundays and/or holidays for at least one and one-half time the normal rate of pay for the work performed.”

The employees at issue are not directly involved in taking bets on Sundays on Twin River’s simulcast of horse and dog races at other tracks across the county, a point stressed by Twin River’s lawyer. But the union argued — and the arbitrator agreed — that current law requires dog-racing as a condition for operating the thousands of video-slots that have become the heart of its business.

“The fact of the matter is that [the mutual] end of Twin River is a very small part of its operation and it is their VLT business which produces between 80 percent and 90 percent of its revenue. Nevertheless, the foundation for Twin River’s license to operate its gaming business is based upon its pari-mutuel … business. In this sense, no pun intended, it is the tail wagging the dog,” he wrote.

In issuing his opinion and award, Cooper, Twin River’s lawyers argued, “made irrational and illogical determinations” that were not only “clearly erroneous” but also threaten to cost Twin Rivers’ owners “substantial money” over and above what the contract requires.

In his plea for an expedited hearing on the union’s bid to post security for the disputed $145,000, Local 334 lawyers Marc B. Gursky and Elizabeth Wiens told the court: “Plaintiff has defaulted on several loans, is in debt to a group of lenders led by Merrill Lynch in an amount estimated at $565 million, owes millions of dollars to contractors who performed work on the Twin River renovations and is potentially facing bankruptcy.

“If defendant does not attach its members’ wages now, by the time a decision is rendered … there is a high likelihood that [BLB] will be unable to satisfy the judgment.”

A pre-trial conference in the case has been scheduled before U.S. District Court Judge William E. Smith on March 19.

Twin River is run by a holding company composed of Kerzner International, Starwood Capital Group and Waterford Group LLC. The company bought the Lincoln Park dog track in 2005, along with three greyhound racetracks and a horse track in Colorado, and then embarked on a $225-million renovation and expansion.

kgregg@projo.com