Supreme Court Sets Employer-Friendly Standard in FLSA Overtime Exemption Cases

On January 15, 2025, the Supreme Court issued a unanimous decision in E.M.D. Sales Inc. v. Carrera, providing clarity and consistency for employers navigating federal overtime exemption classifications under the Fair Labor Standards Act (FLSA). The ruling rejected a heightened “clear and convincing” evidence standard, instead affirming the more common “preponderance of the evidence” standard. This decision has significant implications for employers nationwide.

Key Case Details

The case arose when employees of a grocery distribution company claimed they were misclassified as exempt outside sales employees, making them ineligible for overtime pay. Under the FLSA, employees are generally entitled to overtime pay unless they fall under one of 34 exemptions. Misclassification claims, such as this one, often hinge on whether the employer meets its burden of proof in justifying an exemption.

Prior to this ruling, federal appeals courts were split on the standard of proof employers must meet. While most courts applied the preponderance of the evidence standard (requiring a 51% likelihood that the employer’s classification was correct), the 4th Circuit uniquely required a higher “clear and convincing” standard (equating to an 80-90% likelihood). This disparity prompted the Supreme Court to step in.

Supreme Court Ruling Highlights

1. Preponderance Standard Confirmed: The Court held that the preponderance of the evidence standard applies across all FLSA exemption cases. This lower threshold aligns with the general standard used in American civil litigation since the FLSA’s enactment in 1938.
2. Rejection of a Heightened Standard: The Court emphasized that the FLSA does not call for a heightened burden of proof, nor does the Constitution or rare coercive government actions warrant such a standard in this context.
3. Balanced Policy Considerations: In rejecting employees’ arguments for a higher standard to protect workers, the Court noted that the FLSA balances competing interests of employers and employees. Justice Kavanaugh, writing for the Court, stressed the importance of adhering to the statute’s text and longstanding evidentiary rules.
4. Impact on Future Cases: The ruling reverses the 4th Circuit’s decision and remands the case to apply the lower preponderance standard to determine if the outside sales exemption was correctly applied.

What This Means for Employers

The Supreme Court’s decision provides much-needed clarity and consistency in FLSA exemption litigation. Employers now face a unified national standard, easing the burden of proof when defending classification decisions. However, this ruling does not eliminate the risks associated with misclassification claims.

To ensure compliance and mitigate litigation risks, employers should:

• Review Job Classifications Regularly: Confirm that exempt positions meet FLSA criteria and accurately reflect job duties.
• Update Job Descriptions: Ensure job descriptions are precise, up-to-date, and aligned with exemption requirements.
• Consider State and Local Laws: Be aware of stricter or additional requirements that may apply at the state or local level.
• Evaluate Risk in Gray Areas: Assess the potential liability of maintaining exemptions for roles that may be subject to challenge.

Looking Ahead

This ruling underscores the importance of proactive compliance with wage and hour regulations. Employers should continue monitoring developments from the Supreme Court and the Department of Labor’s Wage and Hour Division to stay informed about their obligations.

For guidance on navigating wage and hour issues, contact our team of experienced employment attorneys or visit our Wage and Hour Compliance Center.

This article is provided for informational purposes and does not constitute legal advice. Please consult an attorney for specific guidance regarding your workplace policies.