On January 15, 2025, the Supreme Court delivered a significant decision in favor of employers concerning how they prove employees are properly classified as exempt from minimum wage and overtime pay under federal law. In a unanimous ruling, the Court clarified that employers need only meet the “preponderance of the evidence” standard; a lower burden of proof commonly used in civil cases. This replaces the stricter “clear and convincing” evidence standard previously applied by one federal appeals court. This decision simplifies compliance with the Fair Labor Standards Act (FLSA) and sets a uniform standard across the country, reducing litigation risks for employers.
The case, E.M.D. Sales Inc. v. Carrera, arose when employees of a grocery distribution company claimed they were misclassified as outside sales employees to avoid overtime pay. The FLSA includes various exemptions, such as the “outside sales” exemption, which applies to employees primarily engaged in sales activities outside their employer’s office. The Fourth Circuit Court of Appeals had ruled that employers must meet a higher burden of proof to justify such classifications, but the Supreme Court disagreed.
Employers should note that while the ruling reduces the evidentiary burden in federal cases, compliance with state and local wage laws remains critical. Misclassification errors can still lead to costly penalties and lawsuits, making accurate and updated job evaluations essential. For assistance in correctly classifying your employees and ensuring compliance with both federal and state laws, feel free to reach out to our team at info@mnklawyers.com
