Key Takeaways:
- The Third Circuit held that the FLSA does not provide a cause of action for overtime gap time claims.
- Despite the ruling, employers may still face liability under state wage payment laws for unpaid straight-time wages.
In a significant wage-and-hour decision, the U.S. Court of Appeals for the Third Circuit rejected a key component of a $35.8 million judgment obtained by the U.S. Department of Labor (DOL), holding that the Fair Labor Standards Act (FLSA) does not permit recovery of so-called “overtime gap time.”
The June 3, 2026 decision in DOL v. Comprehensive Healthcare Management Services LLC marks the first time the Third Circuit has addressed whether employees may recover compensation for non-overtime hours worked during a workweek in which overtime was also worked. The court answered that question with a clear “no,” further deepening an existing split among the federal circuits.
Understanding Overtime Gap Time
“Overtime gap time” refers to unpaid straight-time hours worked in a week where an employee also works more than 40 hours. For example, if an employee works 43 hours in a week but is paid for only 38 hours, two of the five unpaid hours (that fall under 40 hours in the workweek) may constitute “gap time.” Unlike a traditional overtime claim, when an employee is seeking “gap time,” the employee is asking the court for payment for straight-time hours worked that occurred prior to the employee hitting 40 hours in a workweek.
The FLSA primarily governs two categories of pay: minimum wages and overtime compensation. The statute does not expressly provide a remedy for overtime gap time.
In this case, the DOL argued that the FLSA permits recovery of those unpaid hours when they occur in an overtime workweek. The district court agreed and included overtime gap time damages as part of its award following a bench trial. On appeal, the Third Circuit rejected that interpretation.
The Court’s Reasoning
Writing for the majority, Chief Judge Michael Chagares concluded that the FLSA’s text requires employers to pay minimum wages and overtime compensation, but does not create a separate cause of action for overtime gap time. According to the court, the statute’s language simply does not support extending FLSA liability to unpaid straight-time hours that do not themselves constitute overtime.
The court rejected the DOL’s argument that the FLSA’s overtime provisions implicitly require payment of all straight-time hours at an employee’s regular rate simply because overtime premiums are calculated using that rate.
The panel found no statutory basis for that interpretation and declined to defer to the agency’s guidance on the issue.
Importantly, the court emphasized that employees are not necessarily left without a remedy. Claims for unpaid straight-time wages may still be available under state wage payment laws or through breach-of-contract actions, depending on the circumstances.
A Growing Circuit Split
The Third Circuit joins the Second Circuit in holding that overtime gap time claims are not cognizable under the FLSA. The decision deepens an existing circuit split with the Fourth Circuit, which has recognized overtime gap time claims under the FLSA. The U.S. Supreme Court declined to review the Fourth Circuit’s decision in 2022, leaving employers subject to different rules depending on where they operate.
Takeaways for Employers
For employers operating within the Third Circuit—Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands—the decision provides welcome clarity regarding the limits of FLSA liability for overtime gap time claims. The ruling narrows the scope of potential damages in federal wage-and-hour litigation and may limit the DOL’s ability to pursue similar theories in future enforcement actions.
However, employers should not view the decision as eliminating risk related to unpaid straight-time wages. While the decision narrows one avenue of FLSA liability, it is far from the final word on unpaid, non-overtime straight-time wages. As the federal circuit split persists and state wage laws continue to evolve offering wider remedies, employers remain subject to a patchwork of wage-and-hour obligations that extend well beyond the FLSA. Plaintiffs are likely to continue asserting state-law claims where available bring more complicated hybrid cases seeking a collective action under the FLSA and a class action for state claims under Rule 23. Thus, employers should consider auditing pay practices, timekeeping procedures, and exemption classifications, particularly in industries such as healthcare where wage-and-hour enforcement remains a priority.
