US Supreme Court Unanimously Rejects Higher Standard of Proof for Overtime Exemptions Under FLSA

On January 15, 2025, the Supreme Court handed employers a win by confirming that exemptions under the Fair Labor Standards Act (“FLSA”) need only be proven by a “preponderance of the evidence.” In doing so, the Court unanimously rejected the argument that a higher evidentiary standard—“clear and convincing evidence”—applies to FLSA exemption disputes. As discussed in more detail below, this decision has extensive implications for FLSA cases, especially where the employee’s exemption status is a close call.

FLSA Background

The FLSA establishes certain minimum wage and overtime compensation requirements for employees who work more than 40 hours per week. However, some of the FLSA’s requirements do not apply to categories of employees who qualify under certain statutory exemptions.¹ Each FLSA exemption has its own requirements—many of which relate to the nature of the employee’s job duties. For example, the FLSA’s “outside sales employee” exemption applies to individuals whose primary duty is selling items or obtaining orders for products or services, and who customarily and regularly work away from the employer’s place of business.

It is important for employers to understand the law before deciding to treat an employee as exempt. Employees commonly bring lawsuits—including class and collective actions—claiming that their employer incorrectly classified them as exempt under the FLSA (or state law), and that they are therefore entitled to recover unpaid overtime wages. In defending against misclassification claims, employers have the burden to prove that the employee was correctly classified as exempt—i.e., that each of the requirements for the relevant exemption was met. Prior to the Supreme Court’s decision, a circuit split existed with respect to the proper evidentiary standard applicable to that burden: Although many courts required employers to show that the exemption applied under the “preponderance of the evidence” standard, some courts—including the Fourth Circuit—held employers to a more stringent standard of “clear and convincing evidence.”

The Case: E.M.D. Sales, Inc. v. Carrera, et al.

E.M.D. Sales, Inc. is an international food products distributor. Among its employees are sales representatives who manage E.M.D.’s inventory and take orders at grocery stores that sell E.M.D.’s products. Three sales representatives sued E.M.D., alleging that the company failed to pay them for all overtime hours worked in violation of the FLSA. In response, the company argued that the plaintiffs were “outside sales employees,” and therefore exempt from the FLSA’s overtime requirements.

The district court conducted a bench trial and found E.M.D. liable because it did not prove “by clear and convincing evidence”that the sales representatives were exempt under the FLSA. Specifically, the district court found that E.M.D. failed to carry its burden to prove that plaintiffs “made sales,” rather than merely executing the terms of sales already made. E.M.D. appealed to the Fourth Circuit on the grounds that the district court had erroneously applied the clear and convincing evidentiary standard, rather than the less onerous preponderance of the evidence standard. The Fourth Circuit affirmed the District Court’s decision.

In a unanimous opinion by Justice Brett Kavanaugh, the Supreme Court reversed the Fourth Circuit’s decision. The Supreme Court held that the “default preponderance standard governs when an employer seeks to prove that an employee is exempt” under the FLSA. The Supreme Court explained that there was no statutory or policy reason to apply the heightened clear and convincing evidence standard in such cases. The Supreme Court reasoned that the lower preponderance of the evidence standard should apply because the application of FLSA exemptions do not present any of the three main scenarios in which courts deviate from that default burden and impose a higher burden of proof—i.e., a statutory directive to apply a heightened standard, a constitutional requirement to do so, or unusual circumstances in which the government seeks to impose coercive remedies (such as revoking an individual’s citizenship).

In so ruling, the Supreme Court also rejected policy arguments presented by the employees in support of imposing a heightened standard, noting that rights under the FLSA are no more important than other workplace protections, such as anti-discrimination rights under Title VII, which do not employ a heightened standard of proof. The Supreme Court also rejected arguments that employers should be held to a higher standard because they often control most of the evidence in establishing FLSA violations.

Impact on FLSA Litigation

The Supreme Court’s holding aligns with the approach taken by the majority of federal circuits and resolves any ambiguity regarding which evidentiary standard governs. In circuits that previously applied the clear and convincing evidence standard, it will now be less onerous for employers to prove the applicability of an FLSA exemption.

Although this decision is certainly a win for employers, employers still face potential exposure from misclassification lawsuits and related investigations by the Department of Labor and similar state agencies. Importantly, overtime exemptions and the requirements that an employer must meet to establish that an exemption applies may be more rigorous under applicable state laws. Employers should therefore remain diligent and ensure that positions satisfy all applicable requirements under both the FLSA and state law before treating a position as exempt. Employers should consider proactive, periodic auditing of their classification decisions, as job titles and duties may change from time to time, and legal developments may impact the strengths and weaknesses of certain classification decisions. Working with in-house and/or outside employment counsel can help to mitigate litigation risks and to maintain the privileged nature of such audits, work product and related communications.

¹See 29 U.S.C. §§ 213(a)-(b).