The latest U.S. Supreme Court ruling gives employers a clear picture of the evidence they need to prove an employee meets overtime exemptions. The long-awaited decision settled the standard employers must meet to show that an employee is exempt from the Fair Labor Standards Act (FLSA).
In a unanimous opinion delivered by Justice Kavanaugh, the Court held that the "preponderance of the evidence" standard is appropriate when an employer attempts to prove that an employee is exempt from the FLSA.
Phelps reported in Oct. 2024 that E.M.D. Sales, Inc. v. Carrera started when three sales representatives sued their employer, E.M.D. Sales, Inc., in Maryland federal court. The employees claimed they were owed overtime compensation under the FLSA. E.M.D. Sales, Inc. asserted that the employees were exempt from the FLSA under the "outside sales" exemption and not entitled to overtime. The district court and the Fourth Circuit applied the "clear and convincing standard" in determining the employee's FLSA exemption status. Both found in favor of the employees.
The Fourth Circuit's ruling showcased the rift between appellate courts on the appropriate standard of evidence for these claims, which raised tough and sometimes costly questions for employers. In resolving the 6-1 circuit split, the Supreme Court ruled that the more demanding "clear and convincing" evidentiary standard was not the appropriate burden of proof for employers seeking to demonstrate an employee's FLSA exemption status. The Court noted that this heightened standard is generally prescribed only under specific circumstances: when established by statute, when mandated by the Constitution, or in uncommon situations typically involving coercive government action. The Court found none of these exceptions applied.
Instead, the Supreme Court ruled that the "preponderance of the evidence" standard governs FLSA exemptions. It found significant relevance in the fact that this standard is applied in Title VII employment discrimination cases and acts as the default in civil litigation. Using Title VII as a comparison, the Supreme Court found unpersuasive the employees' arguments that a heightened standard is required to protect public interests and ensure fair wages, as other important workplace protections, including Title VII, rely on a preponderance standard.
The Supreme Court's decision serves as a win for employers nationwide. It provides an across-the-board "preponderance of the evidence" standard to be applied when defending FLSA claims, allowing both parties to "share the risk of error in roughly equal fashion." The question of whether the employees of E.M.D. Sales, Inc. are exempt from the FLSA under this clarified standard remains for the Fourth Circuit Court of Appeals to determine on remand.
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