In a recent decision, the Supreme Court once again stuck to the text and declined to put its thumb on the scale for either party in wage and hour cases.

In E.M.D. Sales, Inc. v. Carrera, the Court unanimously reversed a decision by the 4th Circuit Court of Appeals and held that employers must meet the “preponderance of the evidence” standard, rather than the higher “clear and convincing evidence” standard, when defending a claimed exemption under the Fair Labor Standards Act (FLSA).

Background

Among other things, the FLSA requires employers to meet certain federal minimum wage, overtime pay, child labor, and recordkeeping requirements for all employees who do not fall under a certain exemption. Each year, thousands of lawsuits are filed against employers by employees claiming that a particular exemption should not apply to them. 

E.M.D. Sales is a distributor of food products primarily servicing the mid-Atlantic region of the United States. Faustino Sanchez Carrera and two other salespeople for the company sued E.M.D. Sales for failing to pay them overtime when they worked more than 40 hours per week. However, E.M.D. Sales argued that the employees were not due overtime because they qualified for the “outside salesman” exemption under the FLSA. The district court held that E.M.D. Sales failed to prove the exemption applied by “clear and convincing evidence,” and the 4th Circuit Court of Appeals followed its precedent and affirmed.

The Supreme Court took the case to resolve a circuit split. The 4th Circuit stood alone in requiring employers to prove a worker qualifies for an FLSA exemption by the strict “clear and convincing evidence” standard. Six other circuits had found that whether a worker qualifies for such an exemption should be evaluated based on the less rigorous “preponderance of the evidence” standard.

The employees argued, among other things, that a heightened standard helps fulfill the purpose of the FLSA to ensure that workers are paid a fair wage and to protect against “the social costs of an erroneous finding of fact in an employer’s favor in an FLSA case.” They argued that employees have a lot more to lose than employers when a factual error occurs: an employer has to just pay overtime, whereas the employee is “deprived of a living wage” and “the public is erroneously deprived of an economic system that guarantees a fair day’s pay for a fair day’s labor.”

The employer argued that the preponderance of the evidence standard is the default standard in civil cases and sets a level playing field for both sides. Moreover, Congress did not write the clear and convincing evidence standard into the FLSA, even though it is contained in numerous other statutes. The FLSA does not present the characteristics of those limited cases in which the Court has required a higher standard, such as when the dispute is between the government and an individual or concerns a significant liberty interest of a citizen.

Supreme Court’s Opinion

In his opinion for the Court, Justice Kavanaugh begins by stating that the preponderance of the evidence standard is the burden of proof used in most civil litigation and has been since before Congress enacted the FLSA in 1938. According to Kavanaugh, the lower standard makes the most sense because it allows both parties to share the risk of error.

Generally, courts have applied the higher clear and convincing evidence standard in three instances:  when the statute prescribes it, when the Constitution demands it, and in limited cases where the government proposes to take an unusually coercive action, like taking away a person’s citizenship.

In other statutes, including some that govern labor and employment, Congress specifically required a higher standard of proof. Yet even the employees in this case acknowledged that the FLSA does not prescribe a standard of proof for FLSA exemptions. Moreover, in Price Waterhouse v. Hopkins, the Supreme Court held that the preponderance of the evidence standard should apply in Title VII employment discrimination cases, which arguably have a greater impact on employee rights than the FLSA.

And the Constitution does not demand a higher evidentiary standard in FLSA cases. Such constitutional demands come into play when a citizen’s fundamental rights are at stake, such as the First Amendment right to freedom of speech or rights protected under the Due Process Clause.

The last group of cases Justice Kavanaugh describes as requiring a higher standard of proof are “uncommon” and concern instances in which the government is acting more coercively than just trying to secure monetary damages or other conventional relief from a citizen. As an example, he cites requiring the government to meet a higher evidentiary standard when attempting to take away a person’s citizenship.

As many predicted, Justice Kavanaugh did not limit his ruling to the outside sales exemption, but instead held that the lower preponderance of evidence standard should govern for all exemptions under the FLSA. Moreover, his decision was consistent with the Supreme Court’s 2018 ruling in Encino Motorcars, LLC v. Navarro et al., in which it found that FLSA exemptions should not be subject to an unduly restrictive interpretation. In Encino, the Court held that the exemptions should be subject to a “fair reading,” thereby requiring the evidence to be examined without putting the thumb on the scale for either party.

In a separate concurrence, Justice Gorsuch (writing for himself and Justice Thomas) noted that the default standard should apply “unless Congress alters it or the Constitution forbids it . . . To do otherwise would be to ‘choose sides in a policy debate’ rather than to declare the law as our judicial duty requires.”

Outside Arguments of Interest

Amici in the case came in exclusively on the side of the employer. Business groups and those representing their interests weighed in arguing that applying a heightened burden of proof would upset the carefully constructed balance between employers and employees that Congress envisioned when it enacted the FLSA.

The Solicitor General also argued in favor of the lower standard, making similar arguments to those of petitioners and amici in the case, many of which were also articulated in the Court’s decision.

As a practical matter, the business community has the most to gain from the Court’s decision in this case. As previously mentioned, thousands of lawsuits are filed each year by employees claiming that they were misclassified and are owed additional wages. Had the Court found that the “clear and convincing evidence” standard should apply, it is likely that even more employees would have brought cases alleging FLSA violations. For all regulated parties, E.M.D. Sales is yet another welcome example of the Court starting and ending with the text in cases of statutory interpretation.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].