Real World Impact: In a unanimous decision issued on January 15, 2025, the Supreme Court of the United States ruled that the "preponderance of evidence" standard applies to employers seeking to prove an employee exemption from overtime pay under the Fair Labor Standards Act (FLSA).
Background: The FLSA establishes labor standards, including the federal minimum wage and overtime requirements for workers. Under the law, certain employees can be classified as exempt, meaning they are not entitled to overtime pay. The FLSA places the burden on employers to establish that an exemption applies.
While the courts agreed the burden of proof is on the employer, there was disagreement as to the amount of burden. The Fourth Circuit has held that employers must meet the high clear and convincing standard. However, most Circuit Courts of Appeal (namely, the Fifth, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuit Courts) defaulted to the lower preponderance of the evidence standard, which is the standard required for other employment laws such as Title VII.
Supreme Court Decision: The Supreme Court's decision in E.M.D. Sales, Inc., v. Carrera has now resolved the split in the Circuit Courts by holding that employers only need to establish the overtime exemption by a preponderance of evidence, rejecting the Fourth Circuit's more demanding standard. EMD, an international food distributor in Washington, D.C., was sued by its employees in Maryland's U.S. District Court for failure to pay overtime in violation of FLSA. EMD argued that the employees were exempt under the FLSA's outside-salesperson exemption. The lower court judge decided after a bench trial that the company did not prove by clear and convincing evidence that the employees qualified as exempt and ordered it to pay overtime wages and damages. On appeal, the Court of Appeals followed the circuit standard of requiring clear and convincing evidence and affirmed the lower court's judgment.
The Supreme Court granted certiorari and reversed, finding that the preponderance of evidence standard is the appropriate standard of proof in FLSA exemption cases. In his decision for the Court, Justice Kavanaugh explained that the preponderance of the evidence standard is "the default standard of proof in American civil litigation." He reasoned that the lower evidentiary standard "makes sense" because it allows parties "to share the risk of error in roughly equal fashion." Further, higher burdens of proof are required only by statute or the Constitution, or in other "uncommon cases." The Supreme Court's decision is seen as a win for employers by clarifying that courts should apply the lower evidentiary standard and making it easier for businesses to defend FLSA exemption suits.
The Bottom Line
SCOTUS' decision is a victory for employers, especially those in the Fourth Circuit, which covers Maryland, Virginia, West Virginia, North Carolina, and South Carolina. While it may not impact the number of FLSA lawsuits filed, it provides helpful clarity and consistency for such litigation.
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