Employers Subject to More Lenient Standard for FLSA Exemptions from Minimum Wage and Overtime Pay Provisions

The Fair Labor Standard Act guarantees a federal minimum wage for covered workers and requires overtime pay for those working in excess of forty hours a week. However, not all employees are covered by the FLSA, as Congress provided exemptions for many different types of employees, from baseball players to computer programmers to firefighters and so on. In E.M.D. Sales, Inc., et al. v. Carrera et al., the U.S. Supreme Court unanimously reversed a 4th Circuit decision requiring an employer to prove its case by “clear and convincing” evidence, and found that the preponderance of the evidence standard applies when an employer seeks to show that an employee is exempt from the minimum-wage and overtime-pay provisions of the FLSA.

Several E.M.D. sales representatives sued the company in the U.S. District Court of the District of Maryland alleging that E.M.D. violated the FLSA when it failed to pay them overtime wages. E.M.D. agreed these employees worked more than forty hours per week without receiving overtime pay but instead, E.M.D. argued that the employees were categorized as ‘exempt’ because they fell within the FLSA’s outside-salesman exemption.

The District Court found that E.M.D. failed to prove “by clear and convincing evidence” that the employees qualified as outside salesmen. On appeal, E.M.D. argued the District Court should have applied the less stringent preponderance of the evidence standard. The U.S. Court of Appeals for the Fourth Circuit disagreed and affirmed the District Court judgment, making it the only Circuit holding that the clear and convincing standard applies to the applicability of the FLSA exemptions.

There are three main circumstances when a court must deviate from the preponderance standard in civil litigation: (1) when a statute establishes a heightened standard; (2) when the Constitution requires a heightened standard; and (3) rare situations involving coercive Government action. The Supreme Court concluded that the FLSA does not specify a standard of proof for employee exemptions, no constitutional rights were implicated, and this did not involve unusual coercive action against an individual. The Court noted, “[s]tatutory silence is generally inconsistent with the view that Congress intended to require a special, heightened standard of proof.”

The Court compared FLSA actions to Title VII cases where the Court has consistently held that a preponderance standard applies, stating “[i]f clear and convincing evidence is not required in Title VII cases, it is hard to see why it would be required in Fair Labor Standards Act cases.”

Further, the Supreme Court was unpersuaded by the employees’ “policy-laden arguments,” explaining that even “important public interests remain subject to the preponderance standard.” The Court was quick to avoid choosing a side on a policy debate but rather apply the longstanding default rule for the standard of proof, allowing both parties in a civil case to “share the risk of error in roughly equal fashion.”

This holding provides clear guidance, which puts to rest the misapplication by some courts of the more onerous “clear and convincing evidence” standard for FLSA exemption.