A January 15, 2025, U.S. Supreme Court opinion brought welcome news for employers defending claims of worker exempt status misclassification under the Fair Labor Standards Act (FLSA). In the case at issue, E.M.D. Sales, Inc. v. Carrera, the court clarified the applicable standard of proof, ruling that employers need only demonstrate by a “preponderance of the evidence,” the standard used in most civil cases, that an employee qualifies for an FLSA exemption, rather than the higher more stringent “clear and convincing evidence” standard previously applied by the Fourth Circuit Court of Appeals.
Background of the Case
E.M.D. Sales (“E.M.D.”), a food distributor in the Washington, D.C. area, employed sales representatives who managed inventory and took orders at grocery stores. These employees sued the company, alleging violations of the FLSA’s overtime provisions. E.M.D. contended that the sales representatives were exempt from overtime pay as “outside salesmen” under the FLSA. The district court ruled in favor of the employees, finding that E.M.D. failed to prove the exemption by clear and convincing evidence. On appeal, the Fourth Circuit upheld this decision, prompting the company to seek review from the Supreme Court.
Supreme Court’s Ruling
Justice Kavanaugh, writing for the court, emphasized that the less-exacting “preponderance of the evidence” standard (which would only have required E.M.D. to prove that it was more likely than not that the exemption applied) is the default in civil litigation, absent specific statutory or constitutional mandates for a higher burden of proof. The court identified three narrow exceptions where a heightened standard might apply:
- Statutory Directive: When Congress explicitly requires a higher standard.
- Constitutional Mandate: In certain First Amendment and Due Process cases.
- Extraordinary Government Action: Such as denaturalization or expatriation.
Since none of these exceptions applied to the FLSA exemptions, the court concluded that the preponderance standard governs such disputes.
Impact on Employers
This decision marks a pivotal shift in the legal landscape for employers, particularly those operating in the Fourth Circuit, which includes Maryland, Virginia, West Virginia, North Carolina, and South Carolina. Previously, employers in this jurisdiction faced the challenging task of proving FLSA exemptions by clear and convincing evidence — a higher bar than the preponderance standard. With the Supreme Court’s ruling, employers now have a more consistent and manageable standard to meet across all federal circuits.
Employers relying on the FLSA’s “white-collar” exemptions, such as professional, executive, administrative, and outside sales roles, can now classify employees under these exemptions, knowing that the evidentiary threshold makes these classifications more defensible. This clarity can lead to reduced litigation risks and potential cost savings in defending against wage and hour claims.
Considerations for Employers
While the Supreme Court’s decision provides a more favorable framework for employers, it does not grant carte blanche to misclassify employees. Employers must still ensure that job duties and compensation align with the specific criteria outlined in the FLSA for each exemption. Misclassification can lead to significant legal and financial repercussions.
We continue to see a substantial amount of FLSA litigation, so employers should take care to ensure they are properly applying FLSA exemptions to their workforce. This includes reviewing job descriptions, compensation structures, and actual job duties to ensure compliance with FLSA requirements. Proactively consulting with legal counsel allows employers to ensure employees are properly classified as well as ensure that employers have sufficient documentation and evidence to support such classifications should litigation arise.
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