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The Supreme Court of the United States recently settled a circuit split on the standard of proof required to classify employees as exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay provisions. In a unanimous opinion, SCOTUS held in EMD Sales, Inc. v. Carrera that the “preponderance of the evidence” standard–and not the more stringent “clear and convincing” standard–applies.  

Background

The FLSA mandates federal minimum wage and overtime pay for all employees except those employed in a bona fide executive, administrative, professional, computer or outside sales capacity. “Outside sales” employees have the primary job duties of making sales or obtaining orders or contracts for services or the use of facilities in exchange for consideration paid by a client, and they also primarily work away from their employer’s place of business.

EMD, a distributor of food products in the Washington, DC area, employed sales representatives who managed inventory and took orders at grocery stores. Several sales representatives sued EMD, alleging that the company violated the FLSA by not paying them overtime. EMD argued that the sales representatives were outside sales employees and thus exempt from the FLSA’s overtime pay requirement.

Fourth Circuit: “Clear and convincing”

The US District Court for the District of Maryland ruled that EMD did not prove by “clear and convincing” evidence that its sales representatives met the FLSA exemption standard for outside sales employees, finding that the employees primarily executed the terms of sales already made instead of making new sales themselves. The court held EMD liable for overtime pay. EMD appealed, arguing that the court should have used the less stringent “preponderance of the evidence” standard in deciding whether the sales representatives satisfied the test for the outside sales exemption. The US Court of Appeals for the Fourth Circuit affirmed, adhering to Fourth Circuit precedent that required proof of FLSA exemptions by clear and convincing evidence.

SCOTUS: “Preponderance of the evidence” applies

SCOTUS granted certiorari to resolve a conflict among the circuits regarding the applicable standard of proof for FLSA exemptions–noting that the Fourth Circuit was the only circuit to have addressed the issue and require proof of FLSA exemptions by clear and convincing evidence. SCOTUS reversed and remanded for further proceedings, holding that the lower preponderance of the evidence standard is appropriate for determining FLSA exemptions.

This is the second time[1] that SCOTUS has found that there is no reason to deviate from statutory language or resort to a heightened standard of proof in employment cases, noting:

  • The preponderance of the evidence standard is the default in US civil litigation and typically applies unless a statute (or the Constitution) requires a heightened standard. The FLSA is silent on the standard of proof for exemptions, and when a civil statute is silent, courts typically apply the preponderance standard.
  • There are only three main circumstances in which the Court has deviated from the default standard in civil litigation: when mandated by a statute, when mandated by the Constitution, or in cases involving coercive government action (such as taking away a person’s citizenship). None of those was present here.  
  • The employees argued that a heightened standard should apply based on public interest and the non-waivable nature of FLSA rights, but the Court found these arguments unconvincing. Other workplace protections with important public interests–including Title VII–also use the preponderance of the evidence standard.

Employer takeaways

  • Even with clarification that a lower standard of proof applies to FLSA exemptions, employers should be diligent in ensuring that employees who are classified as exempt meet any applicable job duties and salary threshold tests. Misclassification claims often lead to class action lawsuits, and can be expensive to litigate. Employers should work with counsel to conduct an internal classification audit to ensure that actual job duties and salaries align with the FLSA’s requirements for exemption.
  • Employers should also check state law for state exemption tests. Some states, including California, have exemption tests which may include higher minimum salaries or more rigorous duties tests than those required by the FLSA. Both the state and federal tests must be applied, and if an employee satisfies the federal tests for exemption but not the state tests, the employee is entitled to overtime in all circumstances covered by the state’s law.
  • Employers should keep watch of how the Trump administration handles the US Department of Labor’s (DOL) April 23 Final Rule raising the federal overtime salary threshold (see our prior blog on the rule here).  The DOL has appealed a November 15, 2024 order by a Texas federal judge vacating the rule nationwide, but the Trump administration is expected to make several changes in the near future, including doing away with the rule. This is just one of many areas employers should monitor as the new administration proceeds with expected changes impacting employers. Stay tuned.

[1] In Muldrow v. City of St. Louis, 601 U.S. 346 (2024), the Court used similar reasoning to find that employees in Title VII discrimination cases need only show some harm, rather than substantial harm.  While some circuit courts had read a substantial harm requirement into Title VII claims, SCOTUS noted that there was no such requirement for a heightened showing in the statutory language of Title VII.