Third Circuit Holds FLSA Does Not Offer Remedy for Overtime Gap Claims

The Third Circuit Court of Appeals recently held that the Fair Labor Standards Act (FLSA) does not require employers to pay compensation for non-overtime hours that are worked in a pay period as long as the employee's effective hourly rate does not fall below the minimum wage. Under the FLSA, employers must pay covered employees at least the federal minimum wage plus time and a half for hours worked in excess of 40 per week. "Gap" time is time that is not compensated but that does not push the employee below the minimum wage and also does not count as overtime. For example, assume an employee works 43 hours in the week, but is paid for 39 hours of straight time and three hours of overtime. The one unpaid hour is "gap" time. At least in the third circuit, the FLSA does not require employees to pay the one extra hour of straight time (unless the employee's rate of pay falls below the federal minimum wage). The court noted that employees remain able to pursue the unpaid amounts through state collection and wage laws or by filing breach of contract claims. For more information on the importance of the federal laws governing overtime pay, visit Tax Facts Online. Read More: Link to Q3867.