Employment Law, Workplace Investigations & Trade Secrets Litigation
Employment Law, Workplace Investigations & Trade Secrets Litigation
Employment-related disputes may have far-reaching implications for a company’s reputation, business and ability to attract and retain talent. Clients turn to Paul, Weiss for our deft handling of the most sensitive internal investigations, high-stakes employment and executive-related litigations, and business-critical trade secrets, non-competition and restrictive covenant disputes.
Supreme Court Unanimously Rules That the Preponderance-of-the-Evidence Standard Applies to FLSA Exemption Cases
People
January 22, 2025 Download PDF
On January 15, 2025, the Supreme Court unanimously held in E.M.D. Sales Inc. et al. v. Carrera et al., No. 23-217, that the preponderance-of-the-evidence standard applies when an employer seeks to demonstrate that an employee is exempt from the minimum wage and overtime-pay provisions of the Fair Labor Standards Act (FLSA).
Background
In 2017, the Respondents, sales representatives for EMD, a Washington D.C. food distributor, brought a suit in federal court alleging that the company violated the FLSA by failing to pay them overtime. EMD did not dispute that the sales representatives were not paid overtime, but argued no overtime was due because the sales representatives were exempt from the FLSA’s overtime requirements.
The FLSA guarantees covered workers a federal minimum wage.[1] It also generally requires overtime pay when a covered employee works more than forty hours per week.[2] However, Congress exempted many categories of employees from the minimum wage and overtime-pay requirements.[3] One such exemption encompasses anyone employed “in the capacity of outside salesman.”[4] The FLSA is silent regarding which party bears the burden of proof to demonstrate that an exemption applies, and the statute is also silent as to the applicable burden of proof.[5] Case law construing the FLSA places the burden on the employer to show an exemption applies.[6] Most courts addressing the standard of proof have applied the preponderance standard—the common-law default standard.[7] The Fourth Circuit, however, has long required that an employer demonstrate the applicability of an exemption by clear and convincing evidence.[8]
The District Court held that EMD failed to prove “by clear and convincing evidence” that the employees qualified for the outside sales exemption to the overtime pay requirements.[9] On appeal, EMD contended that the District Court should have applied the less stringent preponderance standard rather than the clear-and-convincing-evidence standard, based on the then-recent Supreme Court decision in Encino Motorcars, LLC v. Navarro.[10] There, the Supreme Court rejected the principle that FLSA exemptions should be construed narrowly, as “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement” itself.[11]
The Fourth Circuit affirmed the District Court ruling, following Fourth Circuit precedent employing the heightened evidentiary standard. Regarding Encino Motorcars, the Fourth Circuit said that the holding concerns statutory interpretation, which is distinct from the standard of proof an employer bears in proving the facts of its case, such that the clear-and-convincing-evidence standard was reconcilable with Encino Motorcars.[12] The panel decision acknowledged that the Fourth Circuit may want to revisit its long-standing precedent applying the heightened standard, but noted that such a choice was in the purview of the en banc court, not the panel.[13]
The Fourth Circuit Court of Appeals was the only Court of Appeals to address the issue and hold that the clear-and-convincing-evidence standard applies.[14] The Supreme Court granted certiorari to resolve the conflict.
Significance of the Issue
FLSA cases are frequently litigated as collective actions and pose significant liabilities for employers. The standard of proof applicable to these cases influences when and how these cases are resolved. Indeed, an amicus brief by the U.S. Chamber of Commerce argued that applying the heightened clear-and-convincing-evidence standard would reduce the courts’ ability “to adjudicate meritless claims at early stages in the litigation.”[15] Where a court applies a heighted burden to an employer’s defense, a court would be less likely to grant summary judgment in favor of the employer, increasing the likelihood of settlement favorable to plaintiffs.
Supreme Court Decision
In a unanimous opinion written by Justice Brett Kavanaugh, the Court held that the preponderance-of-the-evidence standard governs when an employer attempts to demonstrate that an employee is exempt from the minimum wage and overtime-pay provisions of the FLSA.
The Court reasoned that the preponderance standard is the default standard in American civil litigation, and the Court has only deviated from that in three main circumstances, none of which are applicable to the FLSA. Those circumstances include when the statute establishes a heightened standard of proof, when the Constitution requires a heightened standard of proof, and in “uncommon” cases, ordinarily when the government seeks to take “unusual coercive action” against an individual, such as revoking a person’s citizenship. The FLSA does not specify a standard, and the preponderance standard usually governs in silence. Further, the case does not implicate any constitutional rights that may require a heightened standard, and this is not a case where the government seeks to take “unusual coercive action” against an individual. On that basis, the Court determined that the preponderance standard applies.
The Court rejected the Respondents’ “policy-laden arguments” supporting a heightened standard.[16] The Justices refused to “choose sides in a policy debate,” as the FLSA “reflects a balance of competing interests,” rather than falling entirely on the side of employees.[17] In this vein, the Court found unconvincing the argument that a heightened standard applies because the FLSA protects the public interest in a fair economy. The Court drew a parallel to Title VII employment discrimination cases, which apply the preponderance standard when an employer asserts an affirmative defense.[18] The Court similarly rejected arguments that the heightened standard applies because certain of the FLSA’s protections, including overtime, cannot be waived by the employees, as the waivability of a right does not determine the standard of proof.[19]
Thus, the Court concluded that, when an employer seeks to prove an employee is exempt from minimum-wage or overtime-pay provisions of the FLSA, the employer must demonstrate the exemption by a preponderance of the evidence.[20]
Justice Neil Gorsuch, joined by Justice Thomas, wrote a separate concurrence, emphasizing that courts apply the default, preponderance standard, unless Congress alters it or the Constitution forbids it. To do otherwise would be to choose sides in a policy debate, whereas the Court’s role is to declare the law.[21]
Implications
As to FLSA litigation, the Supreme Court’s decision bears minimal implication outside of the Fourth Circuit because the decision maintains the status quo. More broadly, however, the decision is indicative of the Court’s reluctance to construe statutory gaps and ambiguities in favor of more expansive protections for employees. Together with Encino Motorcars, the decisions signal the Court’s commitment to the statutory text and rejection of efforts to expand employee protections through canons of construction or heightened evidentiary standards.
* * *
[1] 29 U.S.C. § 206(a)(1).
[2] 29 U.S.C. § 207(a)(1).
[3] 29 U.S.C. § 213(a)—(b).
[4] 29 U.S.C. § 213(a)(1).
[5] E.M.D. Sales Inc. et al. v. Carrera et al., No. 23-217, slip op. at 6 (U.S. Jan. 16, 2025) (“Slip. Op.”).
[6] See Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 148 (2012).
[7] See Faludi v. U.S. Shale Solutions, L.L.C., 950 F. 3d 269, 273 (5th Cir. 2020); Renfro v. Indiana Mich. Power Co., 497 F. 3d 573, 576 (6th Cir. 2007); Yi v. Sterling Collision Centers, Inc., 480 F. 3d 505, 506–508 (7th Cir. 2007); Coast Van Lines, Inc. v. Armstrong, 167 F. 2d 705, 707 (9th Cir. 1948); Lederman v. Frontier Fire Protection, Inc., 685 F. 3d 1151, 1158 (10th Cir. 2012); Dybach v. Florida Dept. of Corrections, 942 F. 2d 1562, 1566, n. 5 (11th Cir. 1991).
[8] Shockley v. City of Newport News, 997 F.2d 18, 21 (4th Cir. 1993).
[9] Carrera v. E.M.D. Sales, Inc., Civ. No. 17-3066 (D. Md., Mar. 19, 2021), aff’d, Carrera v. E.M.D. Sales Inc., 75 F.4th 345 (4th Cir. 2023), cert. granted, 602 U.S. __ (2024), and rev’d and remanded sub nom. E.M.D. Sales Inc. et al. v. Carrera et al., No. 23-217 (U.S. Jan. 16, 2025).
[10] 138 S. Ct. 1134 (2018).
[11] Id. at 1142.
[12] Carrera v. E.M.D. Sales Inc., 75 F.4th 345, 352–53 (4th Cir. 2023).
[13] Id. at 353.
[14] Slip. Op. at 3 (“The Fourth Circuit stands alone in requiring employers to prove the applicability of Fair Labor Standards Act exemptions by clear and convincing evidence. Every other Court of Appeals to address the issue has held that the preponderance standard applies”).
[15] Brief for the Chamber of Commerce of the United States of America et al. as Amici Curiae Supporting Appellants at 14, EMD Sales Inc. et al. v. Carrera et al. No. 23-217 (2025).
[16] Slip. Op. at 4.
[17] Id. at 5.
[18] Price Waterhouse v. Hopkins, 490 U.S. 228, 253–54 (1989) (plurality opinion).
[19] Slip. Op. at 5.
[20] Id.
[21] Slip. Op. at 1 (Gorsuch, J., concurring).