The Supreme Court will soon hear a wage and hour case with massive implications for employers defending claims under the Fair Labor Standards Act (“FLSA”). Depending on the outcome, the high court’s decision could make it far more difficult for employers to prove a plaintiff/employee is exempt from the FLSA’s minimum wage and overtime requirements.
On June 17, 2024, the United States Supreme Court granted certiorari in E.M.D. Sales, Inc. v. Carrera, which asks the Court to determine the standard of proof employers must meet to show an employee is exempt from the FLSA. Specifically, the Court will resolve whether the applicable evidentiary standard is “preponderance of the evidence”—a much lower bar used by most federal circuit courts—or “clear and convincing evidence”—a far higher standard adopted by the Fourth Circuit. Accordingly, the implications of the E.M.D. decision are significant for employers across the country.
The FLSA establishes minimum wage and overtime requirements for all non-exempt employees in the United States. In short, employers must pay non-exempt employees at least the federal minimum wage (or state minimum wage if it is higher) for all regular hours worked in a workweek, and at least one and a half times their regular rate of pay for all hours worked in excess of 40 during a workweek. Under certain circumstances, employees are deemed “exempt” from the FLSA’s requirements. In FLSA litigation, a defendant/employer bears the burden of proving that an employee is exempt from the statute.
Six federal circuits have traditionally applied a “preponderance of the evidence” standard to FLSA exemption defenses. This standard requires employers to prove only that it is “more likely than not” their assertion is true—and that the plaintiff/employee is, in fact, exempt. In the context of litigation, “preponderance of the evidence” is a relatively lenient standard and requires only that the claim or defense asserted is “more likely than not” true. For this reason, the preponderance of the evidence standard is often called the “51% rule”—meaning that if at least 51% of the evidence favors the position, it is adopted.
Alternatively, the “clear and convincing evidence” standard requires proof that a particular claim or defense is substantially more likely than not to be true. This standard is often referred to as requiring a “high probability” or “high likelihood” of truth. While “clear and convincing” falls below the widely recognized “beyond a reasonable doubt” standard for criminal cases, it far exceeds “preponderance of the evidence.” In sum, a litigant needing to meet a “clear and convincing” standard has a greater burden than one who must only meet the “preponderance of the evidence” standard.
In Carrera v. E.M.D. Sales Inc., the Fourth Circuit went against the grain, resulting in a circuit split. There, the plaintiff/employees alleged they were denied overtime wages under the FLSA. Defendant/employer E.M.D. argued the employees fell within the FLSA’s “outside sales” exemption and were therefore not entitled to overtime wages. In a bench trial, the district court applied a “clear and convincing” evidence standard to E.M.D.’s outside sales affirmative defense. After doing so, the district court found E.M.D. failed to demonstrate that plaintiffs fell within the outside sales exemption. The district court ultimately found E.M.D. liable to plaintiffs for unpaid overtime wages. On appeal, the Fourth Circuit—noting it was bound by longstanding circuit precedent—affirmed the district court’s application of the “clear and convincing evidence” standard to E.M.D.’s affirmative defense.
The Supreme Court will now decide the issue. In its petition for certiorari, E.M.D. argued the Fourth Circuit’s application of the heightened standard to exemption defenses is an anomaly. Indeed, the Fourth Circuit is the only circuit that has held the defendant/employer must meet the clear and convincing evidence standard. Obviously, the Supreme Court’s ruling will have major implications for employers defending FLSA actions. If the Supreme Court adopts E.M.D.’s argument, employers will have a far easier time proving up exemption defenses. Alternatively, if the Supreme Court affirms the Fourth Circuit’s decision, employers will face a significantly higher bar when defending against FLSA liability.
The Supreme Court is set to hear oral arguments for E.M.D. Sales, Inc. v. Carrera in the October 2024 term. We will continue to monitor any developments in the case and provide updates as they become available.
*Jennifer Risberg is a summer associate in the firm’s Dallas office.