Employers Get a Break: SCOTUS Rejects Heightened Evidentiary Standard for FLSA Exemption Claims in Fourth Circuit

On Jan. 15, the U.S. Supreme Court issued a unanimous decision in E.M.D. Sales, Inc. v. Carrera, firmly indicating that employers must establish by a “preponderance of the evidence” that an employee is exempt from the Fair Labor Standards Act's minimum-wage and overtime-pay requirements. This decision is significant for employers in the Fourth Circuit (North Carolina, South Carolina, Virginia, Maryland and West Virginia) because prior Fourth Circuit precedent held employers to a more stringent evidentiary standard when evaluating whether an employee is exempt under the FLSA. The Supreme Court’s decision harmonizes the evidentiary standard nationwide, removing the Fourth Circuit’s stance as an outlier and promoting a uniform approach to FLSA exemption cases.

Standard of Proof

The preponderance-of-the-evidence standard is the typical level of proof required in civil cases. When applying this standard to FLSA exemption cases, an employer must prove that it is more likely than not — that is, greater than 50% — that an employee qualifies for an exemption from FLSA requirements, such as overtime pay or minimum wage.

Before Carrera, employers in the Fourth Circuit had to meet the “clear-and-convincing-evidence” standard to prove an employee’s exemption from overtime. The clear-and-convincing-evidence standard requires proof to be highly and substantially more likely to be true than not — sometimes described as 75% or more. This higher standard made it more difficult for employers in the Fourth Circuit to defend against unpaid overtime claims when employees challenged their exempt status under the FLSA.

Supreme Court Decision

Carrera simplifies the defense for employers by reversing a prior Fourth Circuit ruling that applied the clear-and-convincing-evidence standard for FLSA exemptions. The Court clarified that the preponderance-of-the-evidence standard applies when employers assert an exemption as a defense in FLSA cases. Before Carrera, the Fourth Circuit was the only circuit to impose the more stringent standard for FLSA exemptions.

In adopting the preponderance-of-the-evidence standard, the Court found no statutory, constitutional or policy basis to impose the clear-and-convincing-evidence standard on employers. Justice Kavanaugh, writing for the Court, explained that a heightened evidentiary standard in favor of employees was not appropriate because the FLSA aims to balance competing interests. The Court also noted that other workplace laws protecting significant public interests — such as Title VII, which prohibits employment discrimination on the basis of race, color, religion, sex and national origin — do not require a higher burden of proof. Thus, Kavanaugh concluded, "If 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."

Ultimately, this decision aligns the burden of proof for FLSA exemption cases with the standard used in most civil cases, making it easier for employers to prove that an exemption applies.

Employer Implications and Next Steps

Exempt status under the FLSA has been a hot topic of late for employers, who faced whiplash in the past year while preparing for the DOL’s now-defunct[1] final rule that would have established higher base salary requirements for employees to qualify for an exemption. Many employers had been reviewing job descriptions and anticipating changes in preparation for that rule. While Carrera reflects another new development in the FLSA landscape, it serves to simplify — rather than complicate — the exemption analysis, and therefore should be welcomed news for employers.

The decision has important implications for future FLSA matters and employers:

• Carrera makes it easier for employers to demonstrate that employees are exempt from the FLSA’s overtime-pay and minimum-wage requirements by reducing the applicable burden of proof in the Fourth Circuit.
• By bringing the Fourth Circuit into alignment with all other circuits that require proof by a preponderance of the evidence, the Court’s ruling reduces uncertainty and promotes consistency in how FLSA exemption cases are handled nationwide, which is especially helpful for employers with employees in multiple circuits.
• Employers in the Fourth Circuit may feel more confident in properly classifying employees as exempt. This may lead to better workforce planning and resource allocation, as well as reduced administrative burdens for tracking regular and overtime hours worked, and recalculating overtime pay to include nondiscretionary bonus payments.
• Plaintiffs’ counsel may have weaker bargaining positions in lawsuits, including class actions, potentially leading to earlier and more reasonable settlements.

While Carrera may encourage employers to more confidently classify employees as exempt under the FLSA, they should still review exemptions and job descriptions carefully to ensure that job duties and compensation align with the relevant exemption requirements and make adjustments if necessary. Employers should also be mindful that some states — including California, Colorado, New York and Washington, among others — have different minimum-wage and overtime-pay requirements that apply to employees in those states and should consult legal counsel for advice on complying with such regulations. Robinson Bradshaw’s Employment & Labor Practice Group will be closely monitoring and reporting on the latest developments, including any court challenges or legislative developments. For assistance in evaluating changes to your workplace, please contact a member of our team.

[1] See “U.S. DOL Rule Invalidated Nationwide Reverting Salary Minimums to 2019 Thresholds.”