Background
The United States Department of Labor sued Comprehensive Healthcare Management Services LLC and related entities for violating the Fair Labor Standards Act. The district court held a bench trial and found that the company failed to maintain accurate wage and hour records, paid employees for scheduled hours rather than actual hours worked, miscalculated overtime rates, and misclassified certain employees as exempt. The district court awarded over thirty-five million dollars in damages, including compensation for overtime gap time.
The court’s reasoning
The court held that the text of the Fair Labor Standards Act does not contemplate a remedy for overtime gap time, which refers to non-overtime hours worked for which an employee is not compensated despite working overtime hours in the same pay period. The court rejected the Department of Labor’s interpretive guidance on this issue, finding the statutory text clear and not ambiguous. The court also agreed that the district court applied an erroneous legal standard for exemptions by requiring employers to prove exempt status plainly and unmistakably rather than by a preponderance of the evidence, necessitating a remand for proper analysis.
We hold that the FLSA does not afford a remedy for overtime gap time.
Opinion of the Court
The dissent
What it means going forward
Employees in the Third Circuit can no longer recover unpaid straight-time wages for non-overtime hours worked in a pay period where overtime was also worked under the federal Fair Labor Standards Act. Employers in the circuit must apply the preponderance of the evidence standard when asserting FLSA exemptions.