Written by Emily F. Keimig and Sarah Fucci From Venable LLP on February 25, 2025
On January 15, 2025, the U.S. Supreme Court clarified the burden of proof employers must satisfy when questions arise concerning employee classification under the Fair Labor Standards Act (“FLSA”). In a unanimous decision, the Supreme Court in E.M.D. Sales, Inc. v. Carrera held that the lower preponderance of the evidence standard applies when an employer seeks to demonstrate that an employee is exempt from the minimum wage and overtime pay provisions of the FLSA.
Under the FLSA, employees are classified as either exempt or non-exempt from the FLSA minimum wage and overtime requirements. Non-exempt employees are entitled to a federal minimum wage, as well as overtime pay at a rate of one and one-half times the employee’s regular rate of pay for all hours worked beyond 40 hours in a workweek. Employees who are properly classified as exempt are not subject to these requirements. To qualify as exempt, an employee generally must meet certain tests regarding their job duties and be paid on a salary basis. When a dispute concerning an employee’s exempt status arises, the employer bears the burden of demonstrating that an exemption applies.
Until now, the U.S. Courts of Appeal were split on the applicable evidentiary burden required to prove an exemption under the FLSA, with 6-1 in favor of the preponderance of the evidence standard. Under this standard, employers need only prove that it is “more likely than not” that an employee is exempt under the FLSA. The U.S. Court of Appeals for the Fourth Circuit was the only federal Circuit to apply the significantly higher clear and convincing evidence standard. Under this standard, employers must prove that it is far more likely than not that an employee is exempt.
Court Decision: E.M.D. Sales, Inc. v. Carrera
EMD distributes international food products in the Washington, D. C., metropolitan area. Several EMD sales representatives sued EMD in the U. S. District Court for the District of Maryland for allegedly failing to pay them overtime in violation of the FLSA. EMD did not dispute that the sales representatives were not paid overtime. Instead, EMD contended that the sales representatives were not entitled to overtime pay because they fell within the FLSA’s “outside salesman” exemption.
The District Court ruled in favor of the employees, finding that EMD failed to show that they qualified as exempt outside salesmen based on clear and convincing evidence. EMD was ordered to pay overtime wages and liquidated damages. On appeal to the Fourth Circuit, EMD unsuccessfully challenged the District Court’s use of the clear and convincing evidence standard rather than the less stringent preponderance of the evidence standard. Relying on Fourth Circuit precedent, the Circuit upheld the District Court’s decision.
In reversing the Fourth Circuit’s decision, the Supreme Court explained that the default standard of proof in civil litigation is the preponderance standard as opposed to the more demanding clear and convincing evidence standard. The Supreme Court noted that there are three exceptions to this—when a statute establishes a higher standard of proof, when the Constitution requires a heightened standard, and in certain “uncommon” cases where the government seeks to take unusual coercive action—none of which applied in Carrera. Bringing the Fourth Circuit in line with the rest of the Circuit courts to have addressed this issue, the Supreme Court unanimously held that the lower courts should have applied the preponderance of the evidence standard.
The employees also raised several policy-based arguments contending that the higher evidentiary burden should apply because of the FLSA’s focus on the public’s interest in ensuring workers receive a fair wage, the FLSA’s minimum wage and overtime pay rights are not waivable, and employers exercise greater control over relevant evidence. The Supreme Court declined to engage in a policy debate and instead held that these premises do not require a heightened standard when applying the statute as written and as informed by the longstanding default rule regarding the standard of proof.
What does Carrera mean for employers?
The notable takeaway from the Carrera decision for employers in the Fourth Circuit is that they will have an easier time defending against FLSA claims now that the less stringent preponderance standard applies. For the many employers who were already subject to this lower standard, those in Circuits that have not addressed the issue, and multi-state employers, they can now take comfort in having a uniform standard across all jurisdictions and knowing that they will not be subjected to a higher burden.
However, even with the Supreme Court’s clarity, properly classifying employees in accordance with the FLSA is a difficult, complex task. Whether intentional or not, misclassifying employees can result in a variety of significant consequences, including costly litigation. While the heightened evidentiary standard may no longer apply in FLSA exemption cases, it is still the employer’s burden to defend its exempt classifications when challenges arise. Determining whether an employee is exempt or not requires looking at a number of factors related to both an employee’s job duties and pay. Unlike the evidentiary standard, certain factors may not be interpreted and applied uniformly across all jurisdictions, so employers must be diligent to ensure they understand how any such factors would be applied to them.
On a similar note, employers must also be mindful that the uniform standard set by Carrera applies only to the federal FLSA. Some states and localities have their own wage and hour laws governing employee classification with more restrictive standards or obligations than those required by the FLSA (including, for example, Colorado, New York, California, and Washington, among others). Employers must be vigilant of not only the FLSA requirements, but any applicable state and local laws when classifying employees.
