Supreme Court Clarifies Standard of Proof for FLSA Exemptions: E.M.D. Sales, Inc. v. Carrera

On January 15, 2025, the United States Supreme Court issued a rare unanimous decision clarifying the applicable standard employers must meet in cases involving exemptions under the Fair Labor Standards Act (“FLSA”). In an opinion delivered by Justice Kavanaugh, the Supreme Court found in E.M.D. Sales, Inc. v. Carrera that the default standard of proof in such cases is the “preponderance of the evidence” standard that applies in most civil cases. Below we briefly discuss the facts of the case, how the Court reached this decision, and how employers should react to this decision.

Background

Under the FLSA, employers are required to pay employees certain minimum and overtime wages in most circumstances. However, an employee can be exempted from these requirements so long as their job duties and salary meet one of the exemptions enumerated in the FLSA.  These exemptions are traditionally referred to as the “white-collar” exemptions, and employers may avoid paying employees overtime so long as the employee is properly classified as exempt under one of these exemptions. The burden is placed on the employer to ensure that the employee meets an exemption.

E.M.D. Sales Inc. v. Carrera involved a distributor of international food products in Washington, D.C.  The employer – E.M.D. – employed sales representatives who managed inventory and took orders at grocery stores, and classified these employees as exempt from overtime pursuant to the “outside salesperson” exemption. An employee meets this exemption if their primary duty is “making sales” or engaging in sales-related activities as defined in the FLSA, and the employee regularly works away from the employer’s place of business.

Here, various E.M.D. outside salespersons filed suit against E.M.D. arguing they were misclassified as exempt, and sought, among other things, any overtime that they would have earned but for the misclassification.

Lower Court Rulings

The U.S. District Court for the District of Maryland concluded that E.M.D. failed to prove that the employees qualified as outside salespeople, finding that the employees executed sales already made rather than making new sales. The District Court made this finding based on a “clear and convincing evidence” standard, which was a derivation from most civil cases that are adjudicated on a “preponderance of the evidence” standard.

On appeal, E.M.D. argued that the standard should be “preponderance of the evidence.” However, the Fourth Circuit upheld the District Court’s decision, adhering to precedent in various other Fourth Circuit cases in which a “clear and convincing evidence” standard was used.[1]

Supreme Court Analysis and Holding

The Supreme Court began its analysis by highlighting that the default standard of proof in civil litigation at the time of the FLSA’s enactment in 1938 was “preponderance of the evidence.” The Court noted that only under discrete circumstances do civil courts deviate from this standard. The Court listed the following three instances:

1. when a statute requires a higher standard, highlighting that the FLSA specifically requires a higher standard for whistleblower retaliation cases;
2. when the Constitution requires a higher standard, such as in First Amendment or certain due process cases; or
3. in “uncommon” cases involving unusual, coercive government actions, such as cases involving denaturalization.

The Court found no basis for a heightened standard in this case. First, the FLSA does not specify a particular standard of proof, nor does the Constitution dictate a higher standard being used. Second, no unusual government action is involved in determining the applicability of an FLSA exemption.

In reaching its holding, the Court rejected various policy arguments made by the employees where they argued that strong public interest exists in a “well-functioning economy where workers are guaranteed a fair wage.” The Court found that while this was the case, there are policy interests on both sides, and neither justifies the use of a higher standard of proof.

The Court also dismissed the argument that the non-waivability of minimum wage and overtime rights necessitates a higher standard, drawing parallels to criminal defendants waiving jury trials.

Lastly, the Court found that the employer’s control over most evidence does not justify a heightened standard, as similar conditions exist in Title VII employment discrimination cases.

Conclusion and Next Steps for Employers

The Supreme Court’s decision reaffirms that the “preponderance of the evidence” standard applies when employers seek to prove an employee’s exemption under the FLSA. This ruling provides clarity and consistency in the application of the FLSA, ensuring that the burden of proof remains balanced between employers and employees.

Despite this favorable ruling, Employers should continue to perform an extensive review of the various job titles of their employees to ensure their duties and salary properly meet one of the specifically enumerated exemptions.

[1] The Court noted that the Fourth Circuit was the lone circuit that applied the “clear and convincing evidence” standard over the preponderance of the evidence standard.