Employers do not need to meet a heightened standard of proof to establish an exemption from the minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA), the U.S. Supreme Court ruled in E.M.D. Sales, Inc. v. Carrera, No. 23-217 (Jan. 15, 2025). In a unanimous decision, the Supreme Court clarified that employers need only meet the “preponderance of evidence” standard.
Case Background
The FLSA generally requires employers to pay employees minimum wage for all hours worked and overtime for hours exceeding 40 in a given work week. In the underlying case, three sales representatives filed a lawsuit against their employer asserting that the employer failed to pay them overtime. The employer argued that the employees were not entitled to overtime because they met the FLSA’s outside sales exemption. The trial court found in favor of the employees, applying the heightened “clear and convincing evidence” standard. The employer appealed, arguing that the lower “preponderance of evidence” standard should have applied. The Fourth Circuit upheld the ruling. The employer appealed to the U.S. Supreme Court.
The Supreme Court’s Decision
In an opinion written by Justice Brett Kavanaugh, the Supreme Court held that the “preponderance of evidence” standard, the default standard of proof that governs the majority of civil cases, should have been applied to the employees’ FLSA claims. Justice Kavanaugh reasoned that the rare instances in which the higher “clear and convincing standard” typically applies—including situations where the standard is expressly set forth in the applicable statute, where the constitution mandates a higher standard, or where the case involves coercive government action—were not present and did not apply to cases brought under the FLSA. While the Supreme Court held that the trial court and Fourth Circuit had applied the incorrect standard of proof, it did not address the central substantive issue of whether the outside sales exemption applied to the employees. Instead, the Supreme Court remanded the case for the lower courts to decide.
Impact on Employers
The Supreme Court’s decision was welcome news for employers. Instead of being required to meet a heightened standard, employers now have clarity from the nation’s highest court that the lower standard applies. This outcome was expected by many legal observers, as the Fourth Circuit’s decision was an outlier among the federal courts that have decided the issue.
That is where the good news ends. While we can celebrate this as a “win” for employers, the reality is that the Supreme Court simply restored the standard of proof that applies in the vast majority of civil cases. Employers must continue to be vigilant, and cannot be complacent, when it comes to the FLSA (or any applicable state wage and hour law). The Supreme Court’s decision does not grant employers license to ignore or downplay the significance of the FLSA. Regardless of the standard of proof, it remains the employer’s burden to prove that an employee is properly treated as exempt. Employers must continue to ensure that they are conducting a thorough and thoughtful FLSA exemption analysis anytime an exemption decision is made.
Employers should monitor changes in duties, maintain appropriate documentation regarding classification decisions, and review and update job descriptions. Employers should also seek counsel when necessary given the significant gray area (what does it mean to “exercise discretion and independent judgment”? what is a “matter of significance”? what is a “primary duty”?) built into the FLSA’s tests. As some employers are painfully aware, failure to properly classify employees can expose employers to significant damages for unpaid overtime claims. An ounce of prevention is worth a pound of cure.
Ryan W. Jaziri represents employers in labor and employment matters locally and nationally across various industries, including higher education, retail, health care, municipalities and small businesses. As a litigator, Ryan defends employers in claims of discrimination, retaliation, harassment, breach of contract, restrictive covenant violations, and wage and hour lawsuits. Ryan regularly appears in federal and state courts, as well as before government agencies such as the Equal Employment Opportunity Commission, U.S. Department of Labor, and similar state agencies across the country.
Jack Thaler counsels employers in labor and employment law matters. His experience spans all angles of employer-employee relationships, advising management on wage and hour laws, breach of contract, severance negotiations, non-competition agreements, discrimination, sexual harassment, and retaliation. He also advises clients on compliance with the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA), reviewing and updating employee handbooks and policies to align with the often-shifting employment laws.
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