Employment Law Update: Supreme Court Rejects Higher Evidence Standard for FLSA Employer Determinations
Date: January 23, 2025
By:
Megan E. Lensink
The FLSA imposes federal minimum wage and overtime requirements on employers, but many types of employees are exempt from these requirements, including outside salespeople; the category of employees under review in this case. Employers are tasked with determining which employee classifications are exempt or non-exempt in accordance with regulations promulgated by the Department of Labor. Misclassification is a significant concern for employers inasmuch that, in the event they make an incorrect classification decision, they will be liable for unpaid overtime, back pay, and liquidated damages for up to a three-year period in certain circumstances. In addition, they may be liable to pay the attorneys’ fees of employees who bring litigation to recover the unpaid wages.
The employer’s burden of proof to defend its classification decision was the central question in the EMD Sales case. In particular, the plaintiffs in EMD Sales argued that an employer should be required to justify its FLSA determinations under a higher standard of evidence – clear and convincing – versus the less onerous “preponderance of the evidence” standard commonly used in civil cases. The preponderance standard requires that an employer show that it is more likely correct than incorrect in classifying an employee as FLSA exempt, which is an easier burden to satisfy.
The clear and convincing evidence standard, by contrast, imposes a heightened burden of proof, sandwiched somewhere between the preponderance of the evidence standard and the beyond-a-reasonable doubt standard used in criminal trials. The clear and convincing evidence standard only applies in civil cases where the text of the statute requires, where important constitutional rights, such as the deprivation of liberty, are at issue, and where the government seeks to take something more than money from an individual, such as to remove a person’s citizenship.
The Supreme Court rejected the plaintiffs’ argument that employers should be required to prove their exempt status determinations under the “clear and convincing evidence” standard, finding that there was no basis in the text of the FLSA for imposing a higher evidentiary standard on employers. The Supreme Court also rejected the plaintiff’s public policy argument that clear and convincing evidence was the correct standard to apply because of the national importance of protecting fair wages for workers.
The Court pointed out that, “the public interest in Fair Labor Standards Act cases does not fall entirely on the side of employees,” but rather reflects a balancing of employer and employee interests. The Court added, “Rather than choose sides in a policy debate, this Court must apply the statute as written and as informed by the longstanding default rule regarding the standard of proof,” concluding that the statute did not require employers to prove employee determinations by clear and convincing evidence.
The Supreme Court’s decision emphasizes the importance of making correct employee determinations under FLSA. It is imperative that employers understand not only what makes a position FLSA exempt but also the requirements for documentation when making exemption determinations. Whiteford’s Labor and Employment Team is available to assist with such wage and hour audits including position exemption analysis.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.