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December 18, 2014

Second Circuit Rules that the Fair Labor Standards Act (FLSA) Does Not Apply to Claims for Gap-Time Pay

In Lundy v. Catholic Health System of Long Island Inc., No. 12-1453 (2d Cir. Mar. 1, 2013), the Second Circuit Court of Appeals, resolving what had previously been an unsettled issue in the Circuit, held that the Fair Labor Standards Act (“FLSA”) does not permit a cause of action for “gap-time,” even when an employee has worked overtime, provided that the employee is paid at least minimum wage. A gap-time claim seeks compensation for unpaid work below the 40-hour overtime threshold. For example, if an employee alleges that he or she was not paid for hours 35 to 40 in a given week, the employee has asserted a “gap time” claim for those five unpaid hours. Separately, the court also discussed the pleading requirements necessary to state a claim for failure to pay overtime under the FLSA.

The plaintiffs in Lundy, a respiratory therapist and two nurses, brought a class and collective action against a group of hospitals and healthcare providers alleging, among other things, that they were not properly compensated in accordance with the FLSA and the New York Labor Law (“NYLL”) for time worked during meal breaks, before and after scheduled shifts, and for time spent at required training sessions. More specifically, plaintiffs sought pay for alleged overtime hours worked, as well as gap-time pay. Following four amended complaints and numerous orders issued by the United States District Court for the Eastern District of New York, plaintiffs’ claims were ultimately dismissed. On April 11, 2012, plaintiffs appealed to the Second Circuit.

FLSA Gap-Time Claims

The Second Circuit has long held that the FLSA does not permit gap-time claims where an employee has not worked overtime, unless the employee’s average hourly wage for time worked under 40 hours falls below the federal minimum wage. However, in Lundy, the Second Circuit extended this holding to instances where an employee has worked overtime. The court observed that “the text of [the] FLSA requires only payment of minimum wages and overtime wages . . . . [i]t simply does not consider or afford a recovery for gap-time hours.” Accordingly, provided that an employee is paid “the minimum wage or more, the FLSA does not provide recourse for unpaid hours below the 40-hour threshold, even if the employee also works overtime hours the same week.”

In reaching this conclusion, the Second Circuit specifically rejected interpretive guidance issued by the United States Department of Labor (“DOL”) suggesting that employers may violate the FLSA when they fail to compensate employees for gap time hours in weeks in which the employees also work overtime. The court explained that the DOL’s interpretive guidance is not owed deference when it is unpersuasive. Concluding that the DOL failed to provide any “statutory support or reasoned explanation” for its interpretation, the Second Circuit determined that such interpretation was unpersuasive.

Notably, the Second Circuit did not affirm the lower court’s dismissal of plaintiffs’ state law gap-time claims as the lower court failed to explain why it dismissed those claims with prejudice notwithstanding its observation that the NYLL “does recognize Gap Time Claims and provides for full recovery of all unpaid straight-time wages owed.”

FLSA Overtime Pleading Requirements

In addition to its ruling on plaintiffs’ gap-time claims, the Second Circuit also considered, for the first time, “the degree of specificity needed to state an overtime claim under the FLSA.” The court noted that within the Second Circuit, some courts have required plaintiffs to approximate “the total uncompensated hours worked during a given workweek in excess of 40 hours.” In other circuits, courts have found the mere allegation that plaintiff worked some amount of unpaid time in excess of 40 hours to be sufficient. Significantly, the Second Circuit concluded that “in order to state a plausible FLSA overtime claim, a plaintiff must sufficiently allege 40 hours of work in a given workweek as well as some uncompensated time in excess of the 40 hours.” Determining whether or not an overtime claim is plausible is ultimately a “context-specific task” left to the reviewing court.

In the instant matter, the Second Circuit affirmed the district court’s dismissal of plaintiffs overtime claims because plaintiffs failed to allege even a single workweek in which they: (1) worked at least 40 hours; and (2) worked uncompensated time beyond 40 hours. Rather, plaintiffs’ claims consisted of allegations that they “typically” missed meal breaks, “typically” worked uncompensated time before and after scheduled shifts, and “occasionally” worked additional shifts. The Second Circuit opined that such “allegations supply nothing but low-octane fuel for speculation, not the plausible claim that is required.”

Conclusion

The Lundy decision is significant for employers in two respects. First, the Second Circuit has now held for the first time that, even when an employee has worked overtime, the FLSA does not permit gap-time claims for uncompensated work that does not reduce the average hourly wage for the week below the federal minimum wage. Second, the court’s decision provides a general framework for motions to dismiss overtime claims that do not sufficiently allege that a plaintiff worked at least 40 hours in a week and was not compensated for the time worked in excess of 40 hours.

Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.

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