At a Glance

• The Third Circuit held that the Fair Labor Standards Act (FLSA) does not allow recovery of “overtime gap time.”
• The court squarely rejected the DOL’s position that employees must be paid their “regular rate” for all hours worked before overtime is calculated.
• The court declined to defer to longstanding DOL guidance, finding it unpersuasive and unsupported by the statute’s text.
• As a result, unpaid straight-time wage claims are pushed into state law and contract theories, not the FLSA.

In a significant development for employers in the Third Circuit, the U.S. Court of Appeals for the Third Circuit recently held that the FLSA does not permit recovery of “overtime gap time” wages. While the decision limits the scope of federal wage-and-hour liability in the Third Circuit, it leaves open the possibility of state law and contract remedies.

Background

The case arose from a U.S. Department of Labor (DOL) enforcement action against a group of healthcare facilities operating across Pennsylvania. Following a bench trial, the district court found violations of the FLSA affecting thousands of employees and awarded more than $35 million in damages.

The alleged violations included inaccurate timekeeping systems, payment based on scheduled hours rather than actual hours worked, and automatic meal break deductions despite employees working through those breaks, among other claims.

In addition to awarding back wages for minimum wage and overtime violations, the district...

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