Seyfarth Synopsis: In E.M.D. Sales, Inc., et al. v. Carrera, et al, the United States Supreme Court unanimously held that employers need only prove an employee is exempt from overtime under the Fair Labor Standards Act by a preponderance of the evidence standard rather than by clear and convincing evidence.
In E.M.D. Sales, Inc., et al. v. Carrera, et al., the United States Supreme Court, in a unanimous opinion, resolved a circuit split and held that the preponderance-of-the-evidence standard governs whether an employee is exempt from overtime under the Fair Labor Standards Act (FLSA). This decision is a win for employers and may have important implications outside the exemption context.
As our readers know well, the FLSA exempts various categories of workers from its overtime requirements, but employers have the burden to prove that an exemption applies. The question the Carrera case answered is what standard of proof employers have to meet to prove that an exemption applies.
Every federal Court of Appeals to have addressed this issue held that the preponderance standard applies except for the Fourth Circuit, which held that employers must prove an exemption by clear and convincing evidence, a much higher standard. The Supreme Court sided with the majority of Court of Appeals and held that the preponderance standard governs.
The Court reasoned that the preponderance standard is the “default” standard in civil cases and analogized the FLSA with Title VII of the Civil Rights Act of 1964 (Title VII), which likewise uses a preponderance of evidence standard. As the Court stated, “[i]f clear and convincing evidence is not required in Title VII cases, it is hard to see why it would be required in Fair Labor Standards Act cases.”
The employees in Carrera had argued that a higher standard should apply because of the importance of the FLSA in supporting “a well-functioning economy where workers are guaranteed a fair wage” and that the FLSA’s rights are not waivable. The Court rejected such policy-based arguments by again drawing a comparison with Title VII. “Eradicating discrimination from the workplace is undoubtedly important. Yet . . . this Court has held that a preponderance standard is appropriate for Title VII cases.” The Court further explained that the text of the statute, not policy considerations, guided its interpretation: “Rather than choose sides in a policy debate, this Court must apply the statue as written and as informed by the longstanding default rule regarding the standard of proof.”
The theme of interpreting the FLSA according to its text, as opposed to its supposed underlying policy objectives, is not new. As we explained here, in Encino Motorcars, LLC v. Navarro, the Court rejected the principle—adopted by most Court of Appeals—that the FLSA’s exemptions should be “construed narrowly,” based on policy considerations. Instead, the exemptions should be given “a fair (rather than a ‘narrow’) interpretation.” This was a welcome change because courts all too often, as we noted here, used the “construed narrowly” principle to reach desired pro-employee results, without persuasive analysis.
Cases like Carrera and Encino may have important implications outside of the exemption context. As we discussed here, federal courts historically have applied a two-step approach to certification of collective actions under the FLSA—with the first step (typically called “conditional certification”) posing a minimal burden for plaintiffs. The justification for this minimal burden or lenient standard often is, at least in part, the FLSA’s remedial purpose–a purpose of just about every other employment (and other) statute. Several courts recently have rejected this approach, adopting a higher burden to justify FLSA collective certification. Carrera fully supports a higher standard for initial certification of a FLSA collective, because—like Encino—it rejects the principle that the FLSA should be construed broadly to effectuate nebulous policy considerations.
Similarly, as discussed here, some courts have held that an individual FLSA claim cannot be settled unless approved by the court or the Department of Labor. Thus, while discrimination and harassment claims (not to mention, almost every other type of civil claim) may be settled without court supervision, some courts have held that settling FLSA claims, even if worth only a de minimis amount, needs judicial approval. Such courts cite the remedial purposes of the FLSA as justification for the need of court supervision. But Carrera—like Encino before it—calls into question the policy-based justification of such court supervision.
In short, Carrera is a welcome employer win, and one that may lead to even more.