Supreme Court Clarifies Burden of Proof in FLSA Exemption Cases, Leaves Key Questions Unanswered

On Jan. 15, the United States Supreme Court issued its decision in E.M.D. Sales, Inc. v. Carrera, which clarified that employers need only prove that an employee is exempt from the Fair Labor Standards Act (“FLSA”) by a preponderance of the evidence. This was a good decision for employers and reversed a Fourth Circuit Court of Appeals decision finding that an exemption must be proven by clear and convincing evidence. This article addresses the reasoning behind the Supreme Court’s decision, the uncertainty posed by questions left unanswered by the Supreme Court, and what employers should do to protect themselves considering this uncertainty.

Generally, in civil litigation, the burden of proof is the “preponderance of evidence” standard—meaning that a party may satisfy their burden by convincing the judge (or jury) that there is a greater than 50% chance that their claim is true. Further, the plaintiff usually has the burden of proof. However, there are certain instances where the defendant has the burden of proof and the law refers to these instances as affirmative defenses.

With this backdrop in mind, the FLSA requires that, in most instances, employees receive the applicable minimum wage and overtime if they work more than 40 hours per week. Also, in a typical FLSA matter, the plaintiff/employee has the burden of proof of showing, by a preponderance of evidence, that either they did not receive the applicable minimum wage and/or that did not receive required overtime wages. However, the FLSA contains a number of exemptions from these requirements. These exemptions range from the so-called “white collar” exemptions (i.e., administrative, executive, and professional) to outside sales. Federal courts have long recognized that it is the employer’s burden to establish that one or more exemptions apply.

In E.M.D. Sales, Inc. v. Carrera, the plaintiffs alleged that they did not receive the minimum and/or overtime. In response, the defendant employer argued that plaintiffs fell under the “outside sales” exemption which exempts employees from both the minimum wage and overtime. After a bench trial, the US District Court held that the exemption was subject to a clear and convincing burden of proof and further held that the defendant employer failed to meet this burden. The employer appealed to the US Court of Appeal for the 4^th Circuit and argued, among other things, that the district court should have applied the preponderance of evidence standard. The 4^th Circuit disagreed and upheld the US District Court’s decision. In turn, the employer sought review with the Supreme Court.

In reversing, the 4^th Circuit, the Supreme Court observed that preponderance of evidence burden is the default standard in civil litigation. The Supreme Court then explained that higher proof standards apply only when:

1. The statute expressly imposes a different burden (e.g., whistleblower retaliation under the FLSA)
2. The Constitution mandates a higher standard (e.g., involuntary civil commitment); and/or
3.  The government seeks to take unusual coercive action (e.g., taking away citizenship).

The Supreme Court held that none of the foregoing exemptions applied. Next, and perhaps more importantly, the Supreme Court expressly rejected the plaintiff’s “policy-laden arguments” and stated that “[r]ather than choose sides in a policy debate, its role is to “apply the statute as written as informed by the longstanding default rule regarding the standard of proof in civil litigation.”

This holding is certainly positive for employers. However, the Supreme Court notably did not square/harmonize its analysis in Carrera with its prior (and longstanding) precedent that FLSA exemptions must be: “narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit.” As such, the following questions remain:

• Does Carrera, by implication, overrule the Supreme Court’s prior “narrowly construed” precedents?
• If not, how do courts harmonize Carrera’s direction that “[r]ather than choose sides in a policy debate” courts should apply the default preponderance standard of proof with the Supreme Court’s prior direction to narrowly construe FLSA exemptions?
• Will courts rigorously apply the “narrowly construed” standard to, in effect, transform the preponderance of evidence standard into a higher burden of proof standard in exemption cases?

Here are a few key takeaways:

• Carrera should ultimately make it easier for employers to sustain exemption classifications.
• Carrera’s near and medium-term impact will depend on how lower courts both apply Carrera and reconcile Carrera with the Supreme Court’s “narrowly construed” cases.
• Employers should continue to be deliberate in making exemption classification decisions as the liability relating to misclassification can be significant.

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