In a decision that should provide some comfort to employers, the Supreme Court recently held that employers do not have a higher burden of proof demonstrating that an employee is exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).
In E.M.D. Sales, Inc. vs. Carrera, the Supreme Court addressed a split in the federal circuits regarding the level of proof employers must satisfy to establish an exemption under the FLSA.
Specifically, the issue was whether an employer needed to establish the exemption by “clear and convincing evidence,” or the lesser, more common standard known as a “preponderance of the evidence.” E.M.D. Sales, Inc. involved the outside sales exemption to the FLSA overtime requirement.
More commonly, employers attempt to establish that a position is exempt from overtime because it falls within the so-called administrative, professional, or executive exemptions.
In arriving at its decision, the Supreme Court noted that when Congress enacted the FLSA in 1938, the preponderance of the evidence standard was the default in American civil litigation and remains so today and that the narrow circumstances under which the higher standard of clear and convincing evidence might apply were not present.
Although the Supreme Court decision, at first blush, seems to resolve a narrow evidentiary issue of interest only to lawyers litigating FLSA claims, there are a number of important takeaways from the decision, including the following:
- The Supreme Court’s decision makes it easier — but by no means easy — to satisfy their burden under the FLSA to show that an exemption applies.
- The decision is welcome news to employers as it follows a 2018 Supreme Court decision which held that exemptions under the FLSA should be given a “fair reading” rather than an unduly restrictive interpretation.
- The FLSA has never been fully modernized since 1938. As a result, defenses available to employers for wage and hour and overtime claims are generally fewer than those under other employment discrimination statutes.
- The stakes remain high even after the Supreme Court’s employer friendly decision. The FLSA authorizes a broad set of damages, including liquidated damages and attorneys’ fees if an employee prevails.
- Claims under the FLSA, and overtime claims in particular, are likely to remain fact-specific, generally time-consuming, and difficult to defend in the best of circumstances.
- Employers should consider a series of associated, overarching issues that are far too frequently left unaddressed (or only partially addressed):
- Centralizing decisions regarding the characterization of individuals as exempt or non-exempt.
- Evaluating whether any conforming changes will need to be made to employment documents if a decision is made, for example, to recharacterize an individual as exempt or to reduce the salary of an individual.
- Training managers on how to respond to inquiries about the exempt/non-exempt nature of positions.
- Training managers on how to respond to inquiries regarding when and under what circumstances employees can work overtime.
- Using the Supreme Court decision as an important reminder to review existing Employment Practices Liability Insurance (EPLI) policies to determine whether coverage exists for wage and hour – and specifically overtime – claims and, if so, the nature and extent of such coverage.
- Using the Supreme Court decision as an impetus to review existing job descriptions to determine whether positions are, in fact, still exempt and, even if so, whether there are certain revisions to the job descriptions that should be made to attempt to fortify the exempt nature of these positions.
- Consideration of the issues outlined above should be done with and under the direction of counsel to attempt to maintain, to the greatest extent possible, the privileged nature of these considerations.
For more information, contact Marc at 301-657-0184 or at mrengel@lerchearly.com.
