---
title: "Third Circuit Checks DOL Authority on \"Overtime Gap Time\" Under FLSA"
description: Learn how the rescission of EO 14055 and EO 14026 impacts federal contractors. Understand changes to regulations, plus actionable steps to stay compliant.
---

[The Onsi Perspective ](https://www.onsigroup.com/blog)

# [Third Circuit Checks DOL Authority on "Overtime Gap Time" Under FLSA](https://www.onsigroup.com/blog/third-circuit-checks-dol-authority-on-overtime-gap-time-under-flsa)

 Written by [Emmi Gaytan](https://www.onsigroup.com/blog/author/emmi-gaytan) | June 24, 2026 3:11 PM

**A recent federal appellate decision is redefining the limits of wage-and-hour liability—while reinforcing that compliance risks remain firmly in place.**

On June 3, 2026, the U.S. Court of Appeals for the Third Circuit held that the Fair Labor Standards Act (FLSA) does **not allow recovery of “overtime gap time.”**

While the ruling narrows the scope of federal wage claims, it does **not eliminate employer exposure**—it simply shifts it into other legal frameworks, including state law and contract claims.

 

# What Is “Gap Time”?

“Gap time” generally refers to **hours worked that are not compensated by the employer**. It falls into two categories:

1. Pure Gap Time

Unpaid straight-time hours in a week where the employee **does not work overtime**.

**Example:**

- Employee works **35 hours at $20/hour**
- Paid for only **30 hours ($600 total)**
- Effective hourly rate: 
    - $600 ÷ 35 = **$17.14/hour**

👉 Because the Regular Rate of Pay exceeds the Federal minimum wage for the hours actually worked, there is:

- ❌ **No FLSA minimum wage violation**
- ❌ **No FLSA claim for the unpaid 5 hours**

### 2. Overtime Gap Time

Unpaid straight-time hours in a week where the employee **works more than 40 hours**.

**Example:**

- Employee works **45 hours**
- Paid for only **38 hours**
- Missing 2 hours fall **below overtime threshold**

👉 The central question: Can those unpaid non-overtime hours be recovered under the FLSA?

 

# The Third Circuit’s Answer: A Clear Boundary

The Third Circuit answered with a definitive **no**.

The court emphasized that the FLSA requires only:

- **Minimum wage under Section 206**
- **Overtime premiums under Section 207**

It **“does not contemplate overtime gap time.”**

### What this means in practice:

- If total weekly pay still averages at least **minimum wage for all hours worked**
- Then **no FLSA claim exists for unpaid straight-time hours**—even in overtime weeks
- The only recoverable federal claim is for any **unpaid overtime premium**

# A Direct Challenge to DOL Authority

A key aspect of the decision is its rejection of longstanding Department of Labor (DOL) guidance.

The DOL had argued:

- Employees must be paid their** “regular rate” for all hours worked before overtime is calculated**

The court disagreed, stating:

- The FLSA’s text **does not support that interpretation**
- The agency’s guidance was **unpersuasive and not entitled to deference**

This reinforces a broader trend: 👉 Courts are relying more heavily on **statutory text** rather than expanded agency interpretations.

 

# Understanding the “Regular Rate” Impact

The ruling also highlights how overtime is calculated when some hours go unpaid.

The **regular rate** is determined as:

**Total Compensation ÷ Total Hours Worked = Regular Rate **

**Illustration:**

- Employee works **45 hours**
- Paid **$800 (for 40 hours at $20/hour)**
- Actual regular rate becomes: 
    - $800 ÷ 45 = **$17.77/hour**

Overtime is then calculated using this lower rate, meaning:

- Employer owes **additional half-time for overtime hours**
- But **not the unpaid straight time wages under the FLSA**

Therefore; **$17.77(0.5) = $8.89 (correct OT Premium) versus $20.00 (0.5) = $10.00 (flawed OT Premium)**

# Important Caveat: Liability Has Not Disappeared

Although the ruling narrows federal claims, it does **not eliminate wage liability**.

The court made clear: 

Employees may still pursue unpaid wages related to gap time through:

- **State wage laws**
- **Contract theories**

In the underlying case: 

The employer still faced **significant liability tied to systemic pay practices**, including:

- Inaccurate timekeeping
- Auto-deducted meal breaks
- Off-the-clock work

**Bottom line:** The decision **narrows** the scope of the FLSA but does not lessen the need for compliance.

# Where Employers Still Face Risk

The facts behind this case—and related examples—highlight several recurring compliance risks:

### Auto-Deducted Meal Breaks

If employees are **not fully relieved of duty**, the time is compensable. This is a common issue in healthcare and support roles.

### Inaccurate Timekeeping and Rounding

Systems that default to scheduled hours or consistently favor the employer can create liability exposure and evidentiary challenges.

### “Engaged to Wait” Time

Time when employees are required to stay onsite (even during downtime), ready to go at a moment’s notice, is often **compensable** if not free to leave.

### Weak Documentation

Lack of clear records for pay rates, changes in compensation, and time worked can increase exposure during disputes.

 

# A Growing Circuit Split

The Third Circuit now aligns with the Second Circuit in rejecting overtime gap time claims, while:

- The Fourth Circuit has taken a more expansive approach, deferring to DOL guidance

👉 This split increases the likelihood of future **Supreme Court review**

 

# What This Means for Employers

### 1. Federal Law Has Defined Limits

The FLSA remains focused on minimum wage and overtime premiums, not full compensation for all hours worked.

### 2. State Law Is More Important Than Ever

Employers must evaluate state wage-and-hour laws and contract obligations as these may allow recovery for unpaid straight-time wages.

### 3. Recordkeeping Is Critical

Accurate records reduce liability risk, support proper wage calculations, and help defend against claims.

### 4. Overtime Calculations Must Be Precise

Even under narrower FLSA interpretations, errors in calculating the regular rate or overtime premium remain **high-risk issues. **

 

# The Bottom Line

The Third Circuit’s decision represents a **clear boundary-setting moment** for the FLSA.

It confirms:

- The FLSA guarantees: 
    - ✅ Minimum wage
    - ✅ Overtime premium
    - ❌ Not full payment of all hours at the agreed rate
- Both **pure gap time** and **overtime gap time** claims fall outside the statute when minimum wage is satisfied

As a result, claims for unpaid straight-time wages, when there are no Minimum Wage violations, must now be pursued under:

- **State Employment Agencies **
- **Contract theories**
- **Private Right of Action**

**For employers, the takeaway is straightforward:**   
Strong pay practices, accurate timekeeping, and clear documentation remain essential—because while federal liability may be narrower, overall compliance risk is not.

 

 

Author: Emmi Gaytan & Britney Reyes

Editor: Angela Hendrix, Aaron Ramos, Jennifer Loya, & Luis Decker

[View full post](https://www.onsigroup.com/blog/third-circuit-checks-dol-authority-on-overtime-gap-time-under-flsa)

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