US Supreme Court Rejects Heightened Standard for Proving FLSA Exemptions

The US Supreme Court issued a unanimous decision on January 15, 2025 in EMD Sales Inc. v. Carrera clarifying the evidentiary standard employers must meet to show that an employee is exempt from overtime and minimum wage requirements under the Fair Labor Standards Act (FLSA). The Court held that employers need only show by a "preponderance of the evidence" that an FLSA exemption applies, rejecting a heightened “clear and convincing evidence” standard that the US Court of Appeals for the Fourth Circuit had imposed.

CASE BACKGROUND

Three sales representatives for EMD Sales sued the food distribution company, alleging that the company misclassified them as overtime-exempt under the FLSA and, as a result, violated the FLSA by failing to pay them overtime. EMD argued that the employees were not entitled to overtime pay because they fell under the FLSA’s exemption for outside salespersons. At trial, the district court concluded that EMD failed to prove by “clear and convincing evidence” that the FLSA’s outside-salesperson exemption applied to the employees.

EMD appealed the district court’s ruling to the Fourth Circuit based on the contention that the district court should have only required to EMD demonstrate by a “preponderance of the evidence”—rather than by “clear and convincing evidence”—that the employees fell under the outside salesperson exemption. EMD explained that, of the six federal circuits to address this issue, the Fourth Circuit was the only one to adopt the heightened “clear-and-convincing-evidence” instead of the less-stringent “preponderance” standard.

A Fourth Circuit three-judge panel rejected EMD’s appeal, declining to abandon its precedent of applying the “clear-and-convincing-evidence” standard. The US Supreme Court subsequently granted a petition by EMD for review of the Fourth Circuit’s opinion and heard oral arguments on the matter in June 2024.

THE SUPREME COURT’S UNANIMOUS OPINION

In a unanimous opinion authored by Justice Brett Kavanaugh, the Supreme Court overturned the Fourth Circuit’s ruling in EMD Sales Inc. v. Carrera and held, across all circuits, “that the default preponderance standard governs when an employer seeks to prove that an employee is exempt under the Fair Labor Standards Act.” The Court reasoned that “courts usually apply the default preponderance standard” when faced with a statute that is silent on the standard of proof, as is the FLSA, and that the narrow circumstances when the Court has deviated from that approach do not implicate the FLSA.

The Court explained that it historically has only imposed a heightened evidentiary over the default preponderance standard in the following three circumstances:

• Where a statute specifies a heightened standard of proof
• Where the Constitution requires one
• In “uncommon” cases involving coercive government actions, such as taking a person’s citizenship

Noting that none of the above circumstances apply to the FLSA—and how “the Court has not otherwise used a heightened standard in civil matters”—the Court held that the default preponderance standard applies when an employer seeks to prove that an employee is exempt from the FLSA’s minimum-wage and overtime-pay requirements.

In reaching that conclusion, the Court repudiated the employees’ “policy-laden arguments” for a heightened standard. Particularly, the Court referenced how “other workplace protections that vindicate important public interests remain subject to the preponderance standard” and likened FLSA cases to Title VII employment-discrimination cases where the same preponderance standard applies.

TAKEAWAYS FOR EMPLOYERS

The Supreme Court’s decision in Carrera is a win for employers, as it assures that they will not incur a heightened evidentiary standard in any jurisdictions when seeking to prove that an employee is FLSA-exempt. It establishes a consistent standard of proof across all federal circuits rather than subjecting employers to a steeper one in the Fourth Circuit and other circuits that could have potentially joined it.

Employers should nevertheless remain diligent over the classification of employees as exempt under the FLSA. Employers should be mindful that employees still need to pass the salary basis and duties requirement under both the FLSA and state law to be classified as overtime exempt, and that certain states have different duties tests and/or require higher salaries than the FLSA.