The U.S. Supreme Court has agreed to hear a case that could significantly impact how employers prove exemptions from overtime pay under the Fair Labor Standards Act (FLSA).

In E.M.D. Sales, Inc. v. Carrera, the Court will decide whether employers must meet a “clear and convincing evidence” standard or the lower “preponderance of evidence” standard in showing FLSA exemptions apply to workers.

The case stems from a ruling issued by the 4th U.S. Circuit Court of Appeals that imposed a higher “clear and convincing” evidence standard for proving FLSA exemptions. That standard conflicts with six other federal appeals courts that use the less stringent “preponderance of evidence” standard typically applied in civil cases.

Preponderance of the evidence requires showing that something is more likely than not to be true, often described as the “51% rule.” Clear and convincing evidence, however, demands a higher degree of certainty.

Unpaid overtime

Three sales representatives sued EMD Sales Inc., a food distribution company, for unpaid overtime wages. EMD Sales argued that the plaintiffs were exempt from overtime under the FLSA’s “outside sales” exemption. The case hinged on whether the sales representatives’ primary duty was making sales, particularly at chain stores versus independent stores.

At trial, a federal district court in Maryland applied the “clear and convincing evidence” standard, citing 4th Circuit precedent. The court found that while EMD had clearly shown the plaintiffs made sales at independent stores, they failed to meet this higher standard of proof for chain stores.

The court determined that at chain stores, the representatives’ duties were generally limited to executing sales terms already negotiated by EMD management (e.g., stocking shelves, removing expired items, and issuing credits to the store).

The district court noted that while there was evidence suggesting sales representatives could make additional sales at chain stores, this possibility did not meet the “clear and convincing” threshold. Under this higher standard, the court found that EMD Sales failed to prove the exemption applied, ruling in favor of the plaintiffs.

The 4th Circuit affirmed that decision, maintaining its longstanding precedent despite conflicting with other circuit courts. EMD Sales then petitioned the U.S. Supreme Court to resolve the circuit split on the appropriate evidentiary standard for FLSA exemptions.

White House and Chamber in relative agreement

Notably, both the Biden administration and the U.S. Chamber of Commerce have filed amicus briefs in the case. The Biden administration argued that the 4th Circuit’s ruling was incorrect and urged the Supreme Court to summarily reverse the decision without granting review.

The U.S. Chamber of Commerce urged the Court to take the case, warning that the 4th Circuit’s outlier status could encourage plaintiffs to file nationwide class actions in the states covered by that court, leading to forum shopping.

Employers nationwide are closely watching this case, as it will establish a uniform national standard for establishing FLSA exemptions and could significantly impact wage and hour litigation strategies. The Supreme Court will hear arguments during its next term, which begins in October 2024.