The U.S. Supreme Court recently settled a long-standing dispute among federal appellate courts regarding the standard of proof required for employers to establish exemptions under the Fair Labor Standards Act ("FLSA"). In E.M.D. Sales, Inc. v. Carrera, the Court ruled that employers may prove a FLSA exemption by a "preponderance of the evidence" only, rather than the more stringent "clear and convincing evidence" standard.
Case Background
The FLSA establishes minimum wage and overtime pay protections for employees but allows certain exemptions for specific categories of workers, such as executive, administrative, professional, and outside sales employees. When employers classify an employee as exempt, they bear the burden of proving that the classification is justified.
In this case, E.M.D. Sales, a distributor of international food products, faced a lawsuit from its sales representatives, who claimed it failed to pay overtime compensation in violation of the FLSA. The company argued that sales representatives fell within the FLSA's outside sales exemption and were not entitled to overtime pay. The U.S. District Court for the District of Maryland ruled against E.M.D. Sales, applying the "clear and convincing evidence" standard, which requires a heightened level of proof. The Fourth Circuit Court of Appeals upheld this decision, creating a split among the federal circuits on the appropriate burden of proof in FLSA misclassification cases.
The Supreme Court's Decision
Recognizing the inconsistency among courts, the Supreme Court granted review of the case. In its ruling, the Court emphasized that the default standard of proof in civil litigation is a "preponderance of the evidence," which means that a claim or defense is more likely than not to be true. The Court identified three limited circumstances where a heightened standard of proof might apply: (1) when a statute explicitly requires it, (2) when constitutional rights are implicated, or (3) when coercive government action is involved. Finding that none of these conditions applied to FLSA exemptions, the Court concluded that the preponderance standard should govern.
The Court also noted that Congress had not specified a heightened standard within the FLSA, reinforcing the presumption that the default burden of proof should apply. The ruling aligns with prior decisions from several circuit courts and resolves the inconsistency among jurisdictions.
Implications for Employers
The Supreme Court's decision is a significant victory for employers. While the burden of proofs remains on employers to show a FLSA exemption applies, it is now settled that they do not need to meet an elevated standard of proof.
Conclusion
Despite this favorable outcome, businesses should continue to carefully evaluate employee classifications and maintain thorough documentation of job duties and compensation structures. FLSA misclassifications can still lead to significant legal and financial consequences. To mitigate risks, employers with questions about classification or wage and hour compliance should consult with employment counsel.
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