Written by Cannon Funderburk from Phelps Dunbar LLP on September 18, 2024
Employers may get a clear answer on the evidence needed for Fair Labor Standards Act exemptions when the U.S. Supreme Court starts its term in October. The Supreme Court will take up E.M.D. Sales, Inc. v. Carrera, a case that asks the court to determine which evidentiary standard employers must meet to show that an employee is exempt from the FLSA.
Three sales representatives sued E.M.D. Sales in Maryland federal court claiming they were entitled to, and were not paid, overtime compensation under the FLSA. The employer argued that the employees were not entitled to overtime compensation under the FLSA’s “outside sales” exemption, which applies to employees whose “primary duty is [] making sales” and who are customarily and regularly engaged “away from the employer’s place of [] business.” The district court applied the “clear and convincing” standard in determining the employees’ FLSA exemption status, finding in favor of the employees. On appeal, a Fourth Circuit panel agreed.
This question arises following the Fourth Circuit’s adoption of the “clear and convincing” standard, which requires employers to prove that it is far more likely than not that an employee is exempt. This standard sets a significantly higher evidentiary bar than the “preponderance of the evidence” standard, often referred to as the “51% rule,” which most U.S. circuit courts utilize. The “preponderance of the evidence” standard requires showing that the assertion in dispute is more likely to be true than false. The Fourth Circuit, in its holding, acknowledged that the “clear and convincing” standard was disfavored by other circuit courts but maintained that it was bound by precedent.
The employer in E.M.D. Sales, Inc. v. Carrera has garnered substantial support for its position. Notable supporters who have filed amicus briefs in support of E.M.D.’s stance include the Biden administration and the Chamber of Commerce, both generally asserting that the Fourth Circuit’s ruling is incorrect.
The Supreme Court’s decision will have significant ramifications for employers. Adoption of the Fourth Circuit’s “clear and convincing” standard may increase the likelihood of a finding that an employee does not meet the asserted exemption, increasing the risk of liability under the FLSA. Conversely, adoption of the “preponderance of the evidence” standard may allow employers in the Fourth Circuit to prove exemption defenses more easily. Either decision by the Supreme Court will address a 6-1 circuit split and provide uniformity on employers’ burden of proof in FLSA exemption determinations. The Supreme Court will hear arguments during its next term, which begins in October. Phelps will closely watch this case as it develops and provide updates.
