Supreme Court Clarifies Burden of Proof for Employers in FLSA Exemption Cases

Employers facing lawsuits or government investigations under the federal Fair Labor Standards Act (FLSA) must demonstrate that certain employees are exempt from the law’s requirements for minimum wage and overtime pay. However, a recent decision from the United States Supreme Court has clarified that the burden of proof on employers remains at the customary preponderance-of-the-evidence standard—a lower threshold than previously applied by some courts. This ruling is a win for employers, but it also highlights the importance of ensuring employee classifications are accurate to avoid costly legal disputes.

The Basics of the FLSA

The FLSA sets a federal minimum wage for covered employees and mandates overtime pay for those working more than 40 hours per week. However, some workers are exempt from these requirements based on their job duties and compensation levels. Misclassifying employees as exempt—when their roles do not meet the FLSA’s criteria—can expose employers to significant penalties, back pay claims, and legal expenses. Misclassification disputes are common and often lead to both individual and class action lawsuits.

The Supreme Court Decision

In the case of E.M.D. Sales, Inc. v. Faustino Sanchez Carrera, the Supreme Court ruled that the preponderance-of-the-evidence standard applies to determining whether employees are properly classified as exempt under the FLSA. This standard means that an employer must show that it is more likely than not (a greater than 50% chance) that an exemption applies. Previously, some courts required a higher clear-and-convincing evidence standard, which demands a much stronger level of proof.

The case arose when sales representatives for E.M.D. Sales, a grocery distribution company, claimed they had been misclassified as outside sales employees exempt from overtime pay. The employees sued for back pay, damages, and legal fees, arguing that their work did not meet the exemption’s requirements. While lower courts applied the stricter clear-and-convincing evidence standard, the Supreme Court disagreed, emphasizing that the FLSA does not require a heightened standard of proof for exemption cases.

Key Takeaways from the Ruling

Justice Kavanaugh, writing for the majority, noted that the default burden of proof in civil cases, including FLSA disputes, has always been the preponderance-of-the-evidence standard unless specific statutory or constitutional exceptions apply. The Court rejected arguments that a stricter standard was necessary to uphold the FLSA’s purpose of protecting workers, pointing out that the law balances the interests of both employees and employers.

The decision remanded the case to the lower court to reconsider its ruling using the appropriate standard of proof, offering a clearer path forward for employers defending exemption classifications.

Implications for Employers

While the Supreme Court’s decision simplifies the evidentiary burden for employers, it does not reduce the risks associated with employee misclassification. Wage and hour litigation remains a significant concern, and penalties for noncompliance can be severe. To mitigate these risks, employers should:

1. Regularly Audit Classifications: Ensure that job duties and compensation align with FLSA exemption requirements.
    
2. Update Job Descriptions: Maintain accurate, up-to-date job descriptions that reflect actual employee responsibilities.
    
3. Address Close Calls Carefully: When an employee’s classification is uncertain, consider erring on the side of non-exemption to reduce litigation risk.
    
4. Communicate Reclassifications: If employees need to be reclassified, explain the reasons clearly to minimize resistance and ensure compliance with timekeeping requirements.

Employers should also stay informed about recent legal developments and consult legal experts when addressing complex wage and hour issues. By proactively managing employee classifications, businesses can reduce their exposure to costly lawsuits and maintain compliance with federal and state labor laws.