Third Circuit Rejects 'Overtime Gap Time' Claims Under FLSA
A new decision deepens a circuit split on whether the Fair Labor Standards Act provides a remedy for unpaid non-overtime hours in a week when an employee also works overtime.
The U.S. Court of Appeals for the Third Circuit held that the Fair Labor Standards Act (FLSA) does not create a cause of action for "overtime gap time" claims, which seek compensation for unpaid non-overtime hours in a workweek where an employee has also worked overtime. The case, Secretary of Labor v. Comprehensive Healthcare Management Services, reversed a district court decision and rejected the Department of Labor's (DOL) long-standing interpretation that proper overtime calculation requires prior payment of all straight-time wages.
This decision creates a deeper split with other circuits that do recognize such claims, increasing the likelihood of Supreme Court review. For employers within the Third Circuit (DE, NJ, PA), the ruling provides a defense against this category of federal wage claims, provided the employee's effective hourly rate remains above the minimum wage. However, the court noted that employees might still pursue such unpaid wages under state wage laws or breach of contract theories. Multistate employers now face greater complexity and must navigate conflicting federal precedents, underscoring the need to ensure accurate timekeeping and compliance with all applicable state and federal laws.