Littler Lightbulb – June 2026 Employment Appellate Roundup

Third Circuit Holds Overtime Gap Time Is Not Compensable Under the FLSA 

In a case of first impression in the Third Circuit, Secretary United States Department of Labor v. Comprehensive Healthcare Management Services LLC, 177 F.4th 427 (3d Cir. June 3, 2026), the court considered whether “overtime gap time”— unpaid straight-time hours worked in weeks when employees also worked overtime—is compensable under the FLSA. The case arose following a U.S. DOL wage and hour investigation and lawsuit alleging FLSA violations. The federal court awarded more than $35 million in damages, including compensation for overtime gap time, and the defendant appealed to the Third Circuit.  

The Third Circuit emphasized that the text of the FLSA requires employers to pay nonexempt employees only minimum wage and overtime pay, finding that the plain text of the statute “does not contemplate a remedy for overtime gap time.” The Third Circuit rejected the DOL’s reliance on its interpretive guidance, which provides that “extra compensation for the excess hours of overtime work under the [FLSA] cannot be said to have been paid to an employee unless all the straight time compensation due him for the nonovertime hours ... has been paid,” finding the guidance “provides no reasoning or support for its position.” The court stated that even though the “gap time” is uncompensated, the FLSA is not violated as long as employees are being paid a minimum wage when their salaries are averaged across their actual time worked.  

In reaching its conclusion, the Third Circuit noted the splint among the circuits on the issue, with the Second Circuit, like the Third Circuit, holding that overtime gap time is not compensable under the FLSA, and the Fourth Circuit holding that it is.  

Sixth Circuit Affirms Summary Judgment for the Employer in Title VII Race Discrimination Case  

Barnett-Morgan v. Inverness Technologies Inc., __ F.4th __ (6th Cir. June 8, 2026),¹ involved a claim by a Black employee that she was demoted and replaced by a white woman, terminated, and retaliated against based on her race, in violation of Title VII. The district court granted summary judgment for the employer and the plaintiff appealed to the Sixth Circuit, which affirmed summary judgment on all claims.  

In support of her discriminatory demotion claim, the plaintiff asserted that her replacement was “highly inexperienced.” Examining the facts, the Sixth Circuit held that plaintiff’s “personal beliefs, conjecture and speculation” failed to refute the evidence in the record, which established that the plaintiff’s replacement had a broad depth of experience in all the employer’s positions. The plaintiff’s replacement’s broad depth of experience constituted legitimate, nondiscriminatory reasons for the employer’s actions, the Sixth Circuit held.  

As to the plaintiff’s termination, the court found the undisputed record established that the plaintiff prematurely walked out of a counseling session after repeatedly saying “I’m done;” refused to sign the counseling form; cursed at a fellow employee; and stormed out of her place of employment without her access card. The Sixth Circuit held that these actions constituted a legitimate, non-discriminatory rationale for terminating the plaintiff’s employment.  

The Sixth Circuit also rejected the plaintiff’s contention that she was retaliated against for complaining about a hostile work environment created by a co-worker because she failed to exhaust her administrative remedies regarding that claim. Although the plaintiff claimed that she referenced the issue in an inquiry and an e-mail to the EEOC during its investigation, the Sixth Circuit held that these communications were insufficient to satisfy the requirement that communications must constitute a “charge” of discrimination. To satisfy that requirement, the court held, the document or communication sent to the EEOC “must be verified—that is, submitted under oath or penalty of perjury; … must contain information that is sufficiently precise to identify the parties, and to describe generally the action or practices complained of; and…an objective observer must believe that the filing taken as a whole suggests that the employee requests the agency to activate its machinery and remedial processes.” 

First Circuit Dismisses Professor’s Discrimination Claims Based on Student and Co-Worker Comments

Another discrimination lawsuit, Crawford v. Salve Regina University, 178 F.4th 734 (1st Cir. June 11, 2026), involved a university professor who was terminated for, among other things, longstanding concerns about a lack of responsiveness to students, colleagues, and administrators and the use of derogatory language that “minimize[d] others and promote[d] hurtful stereotypes.” In response, the professor filed suit claiming that the university and its Board of Trustees discriminated against her based on her gender, race, sexual orientation, age, and religion in violation of state and federal law, including Title VII, Title IX, and the ADEA. The district court granted the university’s motion to dismiss, and the plaintiff appealed to the First Circuit.  

In support of her claim that “faculty and students ... harbored an animus towards her” based on her gender, sexual orientation/identification, and race, the plaintiff pointed to student comments about her, particularly a reference to her as a “cis [w]hite woman.” As to her age discrimination claim, the plaintiff alleged that she has been called “old school” for asking students to use her title and not her first name and that a student requested a different advisor with “fresh ideas and perspectives.” The First Circuit rejected these claims on the grounds that the plaintiff failed to provide any facts to suggest that the decisionmakers in her termination considered the students’ comments, endorsed these characterizations, or acted for reasons tied to her protected traits.  

Similarly, the court rejected the plaintiff’s claim that that she was fired because “students” and “certain individuals” objected to her teaching “at all in certain subject areas” because she is a “cis white woman.” The court stated that although “that theory does implicate her protected characteristics,” it was not supported by any factual detail such as who made the statements, what was said, when the statements were made, or whether they were communicated to or relied upon by the decisionmakers. Thus, the court concluded, the district court properly dismissed the plaintiff’s discrimination claims because they were “unsupported by factual detail or supported by details untethered to the university's termination decision.”  

Fifth Circuit Reverses District Court and Grants Summary Judgment to Employer on Overtime Pay Claim 

The plaintiff at issue on appeal in Guilbeau et al. v. Schlumberger Technology Corp., 178 F.4th 922 (5th Cir. June 12, 2026) was a highly compensated employee who sued his employer for overtime pay. Under the FLSA, highly compensated employees are exempt from overtime requirements if, among other conditions, they are paid on a salary basis. The issue in this case was whether the Plaintiff, who was paid on a hybrid basis that was part fixed pay and part variable pay, was paid on a salary basis. The district court denied the employer’s partial summary judgment on the employee’s claims and denied employer’s motion for reconsideration, but granted  employer’s motion to certify interlocutory appeal and the employer appealed to the Fifth Circuit.  

The Fifth Circuit found the plaintiff’s hybrid compensation satisfied the highly compensated employee exemption under 29 C.F.R. § 541.602(a), which requires payment of a predetermined guaranteed amount on a weekly, or less frequent, basis. The plaintiff received a biweekly lump-sum payment above the applicable salary minimum for exempt status, and the amount was predetermined and “guaranteed, not dependent on work quantity or quality.” The court stated that “[i]t is immaterial ‘whether the day-rate portion of Plaintiffs’ compensation was part of the base compensation.’ Under the plain text of Section 602(a), we consider only the ‘predetermined amount’ of pay a worker receives.” As the court explained, 29 U.S.C. §541.604(b) confirms this, providing that “[a]n employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis.” Accordingly, the Fifth Circuit reversed the district court and granted summary judgment to the employer.  

Fourth Circuit Affirms Dismissal of National Origin Claim

In Aljizzani v. Middle East Broadcasting Networks, Inc., 178 F.4th 863 (4th Cir. June 17, 2026), two journalists who were terminated for violation of their employer’s ethics code and social media policy, which required its journalists to remain neutral both when reporting and when posting personally, claimed they were discriminated against based on their national origin. Both plaintiffs, who were Iraqi, had posted personally critical political comments about Iraq, which they refused to remove from their social media accounts after being asked to do so by the employer. The federal district court dismissed the claims and the plaintiffs appealed to the Fourth Circuit, which affirmed the dismissals.  

In support of their claims the plaintiffs alleged that the employer’s ethics code and social media policy were enforced unevenly, and that non-Iraqi journalists rarely, if ever, received reprimands for violating the ethics code or social media policy. However, neither plaintiff provided facts to establish that non-Iraqi employees who engaged in similar conduct—making social media posts critical of Iraqi politics and refusing direct orders to remove them—were not terminated. The Fourth Circuit held that “[s]uch highly generalized comparisons based simply on allegations that other individuals posted on social media without reprimand lack the particularity necessary to permit a court to ‘draw the reasonable inference’ that [the plaintiffs] were terminated because of [their] national origin rather than [their] conduct.” 

Third Circuit Affirms Dismissal of ERISA Claims Against an Employer for Denial of Benefits and Breach of Fiduciary Duty under an Insurance Policy 

Justman v. Accenture LLP, __ F.4th __ (3d Cir. June 17, 2026),² arose following the denial of a husband’s claim for accidental death and disability benefits under his wife’s company-provided life insurance policy. The insurance company that was the claims administrator denied the claim because the death was the result of a “medical illness and/or sickness” and not an “Accidental Injury ... as the direct result of an Accident” under the terms of the plan. After losing an administrative appeal, the plaintiff sued the insurance company and the employer in federal district court claiming wrongful denial of benefits and breach of fiduciary duty under ERISA for failure to provide his wife with updated summary plan description (SPD) documents. After the district court dismissed the complaint, the plaintiff appealed to the Third Circuit.  

As to the denial of benefits claim, the Third Circuit held that the employer was not a proper defendant in the case.  Citing decisions from five other circuits, the court stated that the proper defendant in an ERISA benefits claim case is the “one who controls benefits determinations,” which the Third Circuit held was the insurance company in this case. In reaching its conclusion the court rejected the plaintiff’s assertion that the language in the SPD, stating “[b]enefits under the Plans will be paid only if the Plan Administrator and/or Claims Administrator decide in its discretion that the claimant is entitled to them,” established that the employer had the authority to  make decisions denying the benefits. The court found that more detailed language in the insurance policy and SPD clearly established that the insurance company, not the employer, controlled benefit determinations in this case and was the only appropriate defendant.  

The Third Circuit also found the plaintiff’s claim that the employer breached its fiduciary duty by failing to provide his wife with updated SPDs was meritless.  Among other things, the court held, in a breach of fiduciary duty claim under ERISA, a plaintiff must show “the misrepresentation or inadequate disclosure was material; and [] the plaintiff detrimentally relied on the misrepresentation or inadequate disclosure.” In this case, the court determined the plaintiff failed to allege or establish that purported failure to provide the relevant SPDs was material or that he detrimentally relied on the SPDs and was harmed as a result.  

In the precedential opinion, the Third Circuit affirmed the dismissal of all claims against the employer.   

Fourth Circuit Vacates Class Certification in Pre- and Post-Shift Wage Claim  

The plaintiffs in Overby Jr. v. Anheuser-Busch LLC, 178 F.4th 175 (4th Cir. June 15, 2026) sought certification of a class alleging failure to compensate employees for all mandatory pre- or post-shift work. The district court granted class certification, finding the proposed class met Rule 23(a) and (b)(3)’s requirements for numerosity, commonality, predominance, superiority, typicality, and adequacy. The company petitioned for permission to appeal the class certification decision to the Fourth Circuit, which was granted. On appeal, the Fourth Circuit  found that “the district court committed legal error in finding that plaintiffs’ proposed class met Rule 23’s commonality and predominance requirements despite significant variation in prospective class members’ alleged pre- and post-shift work.”  

Citing prior Fourth Circuit precedent, the court stated that under Rule 23(b)(3), courts must do more than analyze commonality and predominance at high levels of generality, which the Fourth Circuit found the district court failed to do.  Court must assess “(1) whether class members performed specific categories of mandatory pre- or post-shift work at all, (2) where/when class members performed that off-shift work; and (3) what legal standards class members were subject to during the relevant employment periods.” In this case the court found significant variation in pre- and post-shift work among prospective class members.  

The Fourth Circuit also found the district court failed to consider that putative class members were subject to different legal standards as the state laws they claimed were violated changed during the proposed class period.  

Based on these factors, the Fourth Circuit denied certification of the presently defined class and remanded the case to the district court to “find narrower subclasses properly tailored under Rule 23,” or to deny class certification.

Fifth Circuit Reverses NLRB’s Decision Regarding Employee Termination and Coercive Interrogation of an Employee

In Starbucks v. NLRB, __ F.4th __ (5th Cir. June 23, 2026), the Fifth Circuit reversed the NLRB’s decision that the employer terminated an employee for union activity, finding the Board failed to show anti-union animus was a motivating factor in the termination decision. First, the court found the Board’s analysis of comparator treatment was faulty, stating that “an inference of union animus based upon disparate treatment can be made if the only difference between two differently treated employees is the illegitimate criteria at issue (i.e., union activity).” The comparators in this case did not meet that requirement. Next, the Fifth Circuit rejected the Board’s decision based on the timing of the employee’s termination. Timing alone, without more, is not substantial evidence, the court held.

Next, the Fifth Circuit found the Board also failed to establish that a company manager coercively interrogated and threatened economic reprisals with respect to one of its employees. Although “threatening economic reprisals if the employee supports the union” is illegal, the court explained that only applies to the “established wage or compensation system.” Accordingly, in this case the court found the employer’s statement that its plan to increase pay and benefits would be put on pause because the store was going through the unionization process was not a coercive threat. The Fifth Circuit concluded: “[N]either the Board nor the ALJ points to any authority that states that an announced, non-routine, and unimplemented benefit comes within the scope of an established wage or compensation system, nor does anything in the record support such a finding.”

Ninth Circuit Reverses District Court and Holds Arbitration Agreement Enforceable

Cocom v. ABM Aviation Inc., __ F.4th __ (9th Cir. June 23, 2026) involved the enforceability of a mutual arbitration agreement the plaintiff and the employer signed. In response to a putative class action filed by the plaintiff, the employer filed a motion to compel arbitration and strike the plaintiff’s class claims. The federal district court denied the motion, based on the California Court of Appeal’s decision in Cook v. University of Southern California, 321 Cal. Rptr. 3d 336 (Cal. Ct. App. 2024), which found the scope, duration, and lack of mutuality of the agreement in that case to be substantively unconscionable.

The employer appealed to the Ninth Circuit, which reversed the district court. First, the Ninth Circuit held, unlike the agreement in Cook, the agreement at issue in this case was limited to employment-related disputes. Moreover, the Ninth Circuit held the limitation of the agreement to employment-related disputes “imposes an inherent limitation on the agreement’s duration.” As to mutuality, because of the limited scope of the agreement, “any lack of mutuality does not rise to the level of substantive unconscionability.” 

The Ninth Circuit also rejected the plaintiff’s arguments that the agreement’s bar on using arbitration awards for preclusive or precedential effect was substantively unconscionable, holding that the provision was consistent with California law. Finally, the court rejected the plaintiff’s claim that the agreement’s waivers of representative PAGA suits and of public injunctive relief were unconscionable because, even if they were, the provisions were severable.