Employers may now have an easier time establishing that employees are properly classified as exempt, in light of a recent unanimous ruling from the United States Supreme Court. In E.M.D. Sales, Inc., et al. v. Carrera et al., the Court ruled that there is no heightened evidentiary standard to establish an employee is exempt under the Fair Labor Standards Act (“FLSA”).
Congress first enacted the FLSA in 1938 which guarantees minimum wage and provides for overtime pay for those working more than 40 hours in a workweek unless an employee meets a statutory exemption. The law places the burden on the employer to show that an exemption applies.
The Carrera matter centered around several sales representatives who claimed their employer denied them overtime pay by classifying them as exempt under the outside sales exemption. The employees first sued in Maryland District Court, where during a bench trial, the judge ruled that the employer had failed to prove by “clear and convincing evidence” that the employees qualified as exempt. On appeal, the employer argued that the District Court should have applied the less stringent preponderance of evidence standard. The Fourth Circuit disagreed and upheld the District Court’s judgment – again applying the clear and convincing evidence standard. The matter was then brought to the Supreme Court to clarify the evidentiary standard for FLSA cases.
Ultimately, the Supreme Court disagreed with the lower courts and rejected the higher standard, noting that a clear and convincing evidence standard only applies when a statute or the Constitution requires a heightened standard or other rare cases that do not apply to employee-classification issues. Going forward, employers will only need to prove by a preponderance of evidence that an employee is properly classified as exempt.
While the new ruling establishes a lower standard of proof, it does not insulate employers from future claims, and employers should review their exempt and non-exempt employees to ensure proper classification. Additionally, employers should be aware that state wage and hour claims may use a different standard of proof.
