U.S. Supreme Court Continues Effort to Balance the Fair Labor Standards Acts
By Removing Fourth Circuit Court of Appeals Heightened Standard of Proof for Exemptions
BY JEFFREY M. SCHWABER, ESQ. AND EDUARDO S. GARCIA, ESQ.
ON JANUARY 15, 2025, the U.S. Supreme Court held in E.M.D. Sales Inc. v. Carrera that a “preponderance-of-the-evidence” standard, as opposed to “clear and convincing evidence,” is the appropriate standard of proof when an employer attempts to assert an exemption under the Fair Labor Standards Act (FLSA).1 This decision eliminates the Fourth Circuit’s heightened standard of proof for FLSA exemption claims and brings it into line with other Circuits. By so doing, it continues the Supreme Court’s recent approach of having a closer balance between the protections afforded to employees and employers.
The FLSA was enacted by Congress in 1938 to enshrine minimum wage and overtime protections for employees.2
At the same time, Congress established certain specifically delineated exemptions to those requirements, including but not limited to the “outside salesman exemption.”3
Shortly after the FLSA was enacted, the Supreme Court—with a New Deal era orientation—cautioned that: “[a] ny exemption from such humanitarian and remedial legislation must therefore be narrowly construed, giving due
regard to the plain meaning of statutory language and the intent of Congress.”4
Since that time, for many years, the “narrowly construed” edict was used as a rationale for imposing a more rigid scrutiny on employers who sought to demonstrate entitlement to exemptions from overtime claims. In the Fourth Circuit, the Court went so far as to apply the heightened “clear and convincing” standard of proof to an employer seeking an exemption, notwithstanding the absence of any explicit statutory justification for doing so.
U.S. Supreme Court Continues Effort to Balance the Fair Labor Standards Acts
By Removing Fourth Circuit Court of Appeals Heightened Standard of Proof for Exemptions
BY JEFFREY M. SCHWABER, ESQ. AND EDUARDO S. GARCIA, ESQ.
ON JANUARY 15, 2025, the U.S. Supreme Court held in E.M.D. Sales Inc. v. Carrera that a “preponderance-of-the-evidence” standard, as opposed to “clear and convincing evidence,” is the appropriate standard of proof when an employer attempts to assert an exemption under the Fair Labor Standards Act (FLSA).1 This decision eliminates the Fourth Circuit’s heightened standard of proof for FLSA exemption claims and brings it into line with other Circuits. By so doing, it continues the Supreme Court’s recent approach of having a closer balance between the protections afforded to employees and employers.
The FLSA was enacted by Congress in 1938 to enshrine minimum wage and overtime protections for employees.2
At the same time, Congress established certain specifically delineated exemptions to those requirements, including but not limited to the “outside salesman exemption.”3
Shortly after the FLSA was enacted, the Supreme Court—with a New Deal era orientation—cautioned that: “[a] ny exemption from such humanitarian and remedial legislation must therefore be narrowly construed, giving due
regard to the plain meaning of statutory language and the intent of Congress.”4
Since that time, for many years, the “narrowly construed” edict was used as a rationale for imposing a more rigid scrutiny on employers who sought to demonstrate entitlement to exemptions from overtime claims. In the Fourth Circuit, the Court went so far as to apply the heightened “clear and convincing” standard of proof to an employer seeking an exemption, notwithstanding the absence of any explicit statutory justification for doing so.
Ultimately, after briefing and argument, in a 9-0 decision, the Supreme Court reversed, concluding that there was simply no reason to deviate from the default rule on standards of proof and held that “the preponderance-ofthe-evidence” standard governs when an employer attempts to demonstrate that an employee is exempt.”
HISTORY OF FOURTH CIRCUIT’S “CLEAR AND CONVINCING EVIDENCE” REQUIREMENT FOR FLSA EXEMPTIONS
The “clear and convincing evidence” standard employed by the Fourth Circuit can be traced back to Clark v. J.M. Benson Co., 789 F.2d 282 (4th Cir. 1986). While the Fourth Circuit repeatedly confirmed that the “clear and convincing evidence” standard was the appropriate standard of proof for FLSA exemption assertions, it never substantively addressed the rationale underpinning the determination to deviate from the normal “preponderance-ofthe-evidence” standard used in civil cases.5
SUPREME COURT REJECTS “NARROWLY CONSTRUED” CANNON
More recently, the tide has turned toward a more even balance between employees and employers in assessing these claims. In 2018, the Supreme Court struck down the “narrowly construed” cannon in Encino v. Motorcars, 586 U.S. 79 (2018). In that decision, the Supreme Court made clear that adding a requirement of “narrow construction” to a statute such as FLSA can have the effect of eviscerating the guardrails afforded by the delineated statutory exemptions. As the Court explained in reaching its conclusion:
The Ninth Circuit also invokes the principle that exemptions to the FLSA should be construed narrowly. . . . We reject this principle as a useful guidepost in interpreting the FLSA. Because the FLSA gives no “textual indication” that its exemptions should be construed narrowly, “there is no reason to give [them] anything other than a fair (rather than narrow) interpretation.” … Those exemptions are as much part of the FLSA’s purpose as the overtime pay requirement. . . . The narrow-
construction principle relies on the flawed premise that the FLSA “pursues” its remedial purpose “at all costs.”6
The Supreme Court also importantly noted that the “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement . . . (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”).”7 In so doing, the Supreme Court made clear that adding an additional requirement of “narrow construction” would have the effect of tilting the scales in a way not intended by Congress.
EMD SALES INC. V. CARRERA
EMD is a Maryland international/Hispanic food distributor that employs over 150 people. It distributes thousands of products to independent and chain stores across the Washington metropolitan area. In 2017 a lawsuit was filed by three employees who argued they were denied overtime wages. EMD asserted that the three employees were exempt as “outside salespersons” under the FLSA. The U.S. District Court for the District of Maryland ruled in favor of the employees, repeatedly referencing the application of the heightened “clear and convincing evidence” standard of proof mandated in the Fourth Circuit for employers seeking to establish their right to a recognized exemption under FLSA.
The Fourth Circuit reviewed the matter on appeal and indicated that while it was constrained by its own precedent to affirm the decision below, “[p]erhaps this court will want to revisit the appropriate evidentiary standard for FLSA exemptions in light of the Supreme Court’s reasoning in Encino Motorcars and what can be extrapolated from it. But that is a choice that ‘belongs to the en banc Court rather than this panel.’”8
5 See Shockley v. City of Newport News, 997 F.2d 18, 21 (4th Cir. 1993) (emphasis supplied); Desmond v. PNGI Charles Town Gaming, LLC, 564 F.3d 688, 691 (4th Cir. 2009). Morrison v. Cty. of Fairfax, 826 F.3d 758, 765 (4th Cir. 2016).
6 584 U.S. 79, 88-89 (2018) (citations omitted).
7 Id. at 89.
8 75 F.4th 345, 353 (4th Cir. 2023).
. . . to strike the critical balance between protecting workers and maintaining a legal environment where businesses can thrive.
After en banc review was denied, certiorari was granted by the United States Supreme Court. In amicus briefing, the business community through its advocacy groups made clear that the Fourth Circuit’s application of a heightened standard of proof would have adverse consequences to employers in Maryland, Virginia, North Carolina, South Carolina and West Virginia. In the Amici Curiae brief filed by the Chamber of Commerce of the United States of America, National Federation of Independent Small Business Legal Center, Inc., National Retail Federation, and Restaurant Law Center in support of E.M.D. Sales, Inc. stated: “[a] number of decisions within the Fourth Circuit illustrate that employers, from small businesses to social services organizations, face skewed outcomes from a heightened burden of proof.” Ultimately, after briefing and argument, in a 9-0 decision, the Supreme Court reversed, concluding that there was simply no reason to deviate from the default rule on standards of proof and held that “the preponderance-ofthe-evidence” standard governs when an employer attempts to demonstrate that an employee is exempt.”
IMPACT ON BUSINESS COMMUNITIES
The E.M.D. Sales Inc. decision removed the Fourth Circuit as an outlier with regard to FLSA jurisprudence and brought it in line with the other Circuits, thereby finally establishing a uniform and articulated standard of proof for FLSA litigation. It ensures that the FLSA remains a tool for fairness and protection of employee rights without imposing an undue burden on businesses, particularly small businesses, thus enabling them to make decisions— including salary decisions—based on a knowledge of the availability of the statutorily provided exemptions. E.M.D. Sales Inc., especially following on the heels of Encino Motorcars, LLC, illustrates the Supreme Court’s recent efforts to remove a judicial thumb on the scales of congressional intent with regard to FLSA and to count on the express wording of the statute—including its delineated exemptions—to strike the critical balance between protecting workers and maintaining a legal environment where businesses can thrive.
Jeff Schwaber and Eduardo Garcia represented EMD Sales Inc. at the Fourth Circuit and at the U.S. Supreme Court. They are leaders in Stein Sperling’s Commercial Litigation department, and both handle a variety of labor and employment litigation as part of their work.