Third Circuit Rejects FLSA “Overtime Gap Time” Claims and Recalibrates Exemption Analysis to “Fair Reading” and Preponderance Standards

1. Introduction

In Secretary United States Department of Labor v. Comprehensive Healthcare Management Services LLC (3d Cir. June 3, 2026), the Third Circuit addressed a recurring wage-and-hour damages theory: whether the Fair Labor Standards Act (“FLSA”) allows recovery for “overtime gap time”—unpaid straight-time hours in a week where the employee also worked overtime. The Secretary of Labor sued Comprehensive Healthcare Management Services LLC and related entities (collectively, “Comprehensive”) on behalf of nearly 6,000 employees across Pennsylvania healthcare facilities, alleging systemic FLSA violations (recordkeeping, unpaid time, meal-break work, overtime miscalculation, and misclassification as exempt).

After a bench trial, the district court entered judgment for the Secretary and awarded $35,804,438.20, including amounts characterized as overtime gap time. On appeal, the Third Circuit (i) reversed the overtime-gap-time component as not cognizable under the FLSA, (ii) affirmed the court’s burden-of-proof approach and key factual findings, and (iii) vacated and remanded parts of the exemption analysis because the district court applied outdated standards rejected by Encino Motorcars, LLC v. Navarro and E.M.D. Sales, Inc. v. Carrera.

2. Summary of the Opinion

  • No FLSA remedy for overtime gap time: The court held the FLSA provides remedies only for minimum wage (29 U.S.C. § 206) and overtime premiums (29 U.S.C. § 207), and its text does not create a cause of action for unpaid straight-time hours even in overtime weeks. The court reversed the district court’s overtime-gap-time award.
  • Mt. Clemens burden-shifting not misapplied in a prejudicial way: Even if the district court broadly referenced Anderson v. Mt. Clemens Pottery Co., the contested damages components were calculated from Comprehensive’s own records, rendering any overbroad statement harmless.
  • Factual findings affirmed: The Third Circuit found no clear error in the findings that certain pay-by-schedule practices, regular-rate miscalculations, and unpaid meal-break work were widespread and persisted into later years.
  • Exemption analysis vacated and remanded: The district court erroneously construed exemptions “narrowly” and required “plainly and unmistakably” proof; the correct standards are “fair reading” and proof by a preponderance of the evidence.
  • Dissent (Roth, J.): Would recognize overtime gap time claims, reading ambiguity into “regular rate” and giving persuasive weight (Skidmore) to the Department’s interpretive guidance at 29 C.F.R. § 778.315.

3. Analysis

3.1 Precedents Cited

A. The Third Circuit’s prior “gap time” baseline

The panel’s starting point was Davis v. Abington Memorial Hospital, which held that “pure gap time” claims (unpaid straight time in weeks without overtime) are not cognizable under the FLSA because it “requires payment of minimum wages and overtime wages only.” Davis defined “gap time” by reference to Adair v. City of Kirkland and left open whether “overtime gap time” could be recovered. This opinion resolves that open question for the Third Circuit: overtime gap time is also not cognizable.

B. Circuit split: alignment with the Second Circuit; rejection of the Fourth Circuit

The court explicitly confronted opposing approaches from:

  • Lundy v. Cath. Health Sys. of Long Island, Inc. (2d Cir. 2013) — held gap-time hours are not recoverable under the FLSA, even in overtime weeks, emphasizing the statute’s remedial provisions do not reach unpaid straight time above minimum wage.
  • Conner v. Cleveland County (4th Cir. 2022) — allowed overtime gap time claims, relying heavily on the Department’s interpretive guidance (29 C.F.R. § 778.315) and policy concerns about employers “skirting” overtime incentives.

The Third Circuit adopted Lundy’s textual approach and rejected Conner’s silence-as-ambiguity method.

C. Statutory-text primacy and what counts as “ambiguity”

The court invoked Third Circuit textual canons: when statutory language is clear, “the text is the beginning and the end” (Newton v. Comm'r Soc. Sec.). It rejected the notion that statutory silence itself creates ambiguity, citing Lundeen v. 10 W. Ferry St. Ops. LLC (quoting United States v. Craveiro) and its own definition of ambiguity from In re Price (“natural reading remains elusive”).

D. Agency deference after Loper Bright: Skidmore only, and only if persuasive

The Secretary relied on 29 C.F.R. § 778.315 (the Department’s view that overtime is not “paid” unless all straight-time due has been paid). The panel declined to reach deference because it found no ambiguity (Hagans v. Comm'r of Soc. Sec.). Still, it explained that interpretive guidance is evaluated under Skidmore v. Swift, as applied in Smiley v. E.I. Dupont De Nemours & Co. and described in Sanofi Aventis U.S. LLC v. U.S. Dep't of Health & Hum. Servs. (quoting Christensen v. Harris County).

Crucially, the opinion situates this in the post-Chevron landscape: Loper Bright Enterprises v. Raimondo overruled Chelvron U.S.A., Inc. v. Natural Resources Defense Council, Inc. but left Skidmore intact. Under Skidmore, the court found § 778.315 unpersuasive because it lacked reasoning and could not be reconciled with statutory silence; it analogized to refusals of Skidmore deference in K.D. ex rel. Dunn v. Downingtown Area Sch. Dist. and Sanofi Aventis.

E. Evidentiary burdens and representative proof in FLSA cases

Comprehensive argued the district court improperly lowered the Secretary’s burden through Anderson v. Mt. Clemens Pottery Co.. Mt. Clemens addresses the evidentiary consequences of an employer’s recordkeeping failures, allowing proof by “just and reasonable inference” and shifting the burden to the employer to negate that inference. The Third Circuit deemed any broad reference harmless because the challenged damages components were calculated from Comprehensive’s own records.

On the sufficiency of proof for widespread practices, the court reiterated Third Circuit approval of representative testimony: Reich v. Gateway Press, Inc. and Martin v. Selker Bros., Inc., and it emphasized there is “no brightline test” for sample size per Sec'y U.S. Dep't of Lab. v. E. Penn Mfg. Co..

F. Standards for review and harmless error

The panel applied de novo review to legal conclusions (e.g., overtime gap time; burden framework), citing Ingram v. Experian Information Solutions, Inc. and Martin v. Selker Bros., Inc.; clear-error review to factual findings, citing Covertech Fabricating, Inc. v. TVM Bldg. Prods., Inc. and N.J. Retail Merchs. Ass'n v. Sidamon-Eristoff. For harmless error, it relied on 28 U.S.C. § 2111 and the Third Circuit standard from Gen. Motors Corp. v. New A.C. Chevrolet, Inc..

G. Exemptions: Supreme Court course correction

The district court’s exemption analysis used two now-rejected propositions: exemptions are “construed narrowly” and must be proven “plainly and unmistakably.” The Third Circuit corrected both:

  • Encino Motorcars, LLC v. Navarro — exemptions get a “fair reading,” not a narrow construction against employers.
  • E.M.D. Sales, Inc. v. Carrera — employer’s burden is proof by a preponderance of the evidence, not “plainly and unmistakably.”

Because the district court did not make necessary findings under the correct approach (including on the salary-basis criterion), remand was required. The court also referenced the executive-exemption regulatory elements in 29 C.F.R. § 541.100(a) and salary-basis rules in 29 C.F.R. §§ 541.602(a), 541.602(a)(2), and 541.603(a).

H. The dissent’s doctrinal counterpoint

Judge Roth dissented on overtime gap time, arguing that “regular rate” in 29 U.S.C. § 207 is ambiguous and that Supreme Court discussions of “regular rate” in Walling v. Youngerman-Reynolds Hardwood Co. (and related cases) alternate between contract-based and “quotient” (amount paid ÷ hours worked) conceptions. The dissent also cited Overnight Motor Transp. Co. v. Missel, Bay Ridge Operating Co. v. Aaron, and Walling v. Helmerich & Payne to support reading the FLSA as assuming straight-time is fully paid before overtime is properly computed, and would give Skidmore weight to 29 C.F.R. § 778.315.

3.2 Legal Reasoning

A. The court’s rule: the FLSA covers only minimum wage and overtime premiums—no “overtime gap time” add-on

The core reasoning is textual and remedial-structure based: 29 U.S.C. § 206 mandates minimum wage; 29 U.S.C. § 207 mandates an overtime premium for hours over 40; neither provision creates a freestanding right to recover unpaid straight-time hours so long as (i) minimum wage is satisfied (when averaging compensation over hours worked) and (ii) the overtime premium is paid for overtime hours. In the court’s view, recognizing overtime gap time would “read into the FLSA a remedy that Congress did not create.”

B. Rejecting the “regular rate” hook

The Secretary argued that because § 207’s overtime premium is calculated from the “regular rate,” employees must be paid their regular rate for all hours worked. The court characterized this as an “inferential leap” unsupported by the statutory text. The majority acknowledged the practical mismatch created when an employer’s errors cause the “actual rate,” “contracted rate,” and “regular rate” to diverge, but treated that mismatch as a matter for state wage law or contract remedies—not an FLSA cause of action.

C. Why 29 C.F.R. § 778.315 did not carry the day

The court treated the regulation as interpretive guidance and held (1) no need to consult it absent ambiguity, and (2) even if consulted under Skidmore, it was not persuasive because it lacked reasoned support and could not overcome the statute’s silence.

D. Exemptions: doctrinal correction matters, so remand was required

On exemptions, the panel declined to deem the district court’s errors harmless because the district court had not made findings on whether the disputed positions were paid on a salary basis under 29 C.F.R. § 541.602 and whether improper deductions showed an “actual practice” under 29 C.F.R. § 541.603(a). Given the Supreme Court’s instruction in E.M.D. Sales, Inc. v. Carrera to apply the preponderance standard, the Third Circuit followed that model and remanded rather than deciding exemption status itself.

3.3 Impact

  • New Third Circuit precedent on damages theories: Plaintiffs in the Third Circuit cannot use the FLSA to recover unpaid straight-time hours in overtime weeks unless those facts also establish a minimum-wage violation or unpaid overtime premium under § 207. Practitioners should expect more pleading and litigation emphasis on (i) minimum wage averaging, (ii) whether overtime premiums were actually paid, and (iii) parallel state-law wage claims (e.g., Pennsylvania’s statutory wage regimes cited by the court).
  • Reduced leverage from “gap time” in federal-only cases: In collective actions where unpaid time is substantial but minimum wage is still met, FLSA exposure may be materially lower unless plaintiffs can show the overtime premium itself was underpaid.
  • Agency guidance less outcome-determinative post-Loper Bright: The court’s willingness to scrutinize interpretive guidance for reasoning (not just longevity) signals that Skidmore will hinge on analytical quality and fit with text, not merely institutional consistency.
  • Exemption litigation recalibrated: District courts must apply “fair reading” and preponderance standards in exemption disputes, potentially changing outcomes where earlier courts relied on “narrow construction” rhetoric. On remand, Comprehensive may have a more favorable framework, though it still must satisfy each regulatory element (including salary basis and management duties).

4. Complex Concepts Simplified

  • Gap time (general): Hours worked that are not paid, but that do not themselves trigger overtime (because they are ≤ 40) and do not necessarily create a minimum-wage violation (because average pay may still exceed minimum wage).
  • Pure gap time: Unpaid straight-time hours in weeks without overtime. Under Davis v. Abington Memorial Hospital, not recoverable under the FLSA.
  • Overtime gap time: Unpaid straight-time hours in a week where the employee also worked overtime (e.g., worked 43, paid for 40, or worked 45, paid for 35). This case holds such claims are not recoverable under the FLSA in the Third Circuit.
  • Regular rate: The baseline rate used to compute the overtime premium under § 207. Disputes often arise over what payments must be included (shift differentials, bonuses, etc.) and, as highlighted by the dissent, whether “regular rate” presupposes payment of all straight time.
  • Mt. Clemens burden shifting: When employer records are unreliable, employees can prove hours worked by reasonable inference, shifting the burden to the employer to disprove the inference.
  • Executive exemption (salary basis): To be exempt, an employee generally must be paid on a salary basis and meet duties tests. Improper deductions can defeat salary-basis status if they show an “actual practice” of docking pay.
  • Skidmore deference: Courts may give agency interpretations weight only insofar as they are persuasive (reasoned, consistent, thorough), not because they are controlling.

5. Conclusion

This precedential Third Circuit decision establishes a clear rule: the FLSA does not authorize recovery for “overtime gap time”, aligning the Circuit with Lundy v. Cath. Health Sys. of Long Island, Inc. and rejecting the approach of Conner v. Cleveland County. The court simultaneously reinforced post-Loper Bright Enterprises v. Raimondo skepticism toward unreasoned interpretive guidance and corrected the district court’s exemption framework to match the Supreme Court’s modern directives in Encino Motorcars, LLC v. Navarro and E.M.D. Sales, Inc. v. Carrera.

The practical takeaway is twofold: (1) plaintiffs seeking recovery for unpaid straight time in overtime weeks must usually look to state wage statutes or contract remedies (absent a minimum wage or overtime-premium violation), and (2) exemption determinations in the Third Circuit must be litigated under “fair reading” and preponderance standards, with careful attention to salary-basis evidence and deductions practices on remand.