What is the Employer’s Burden-of-Proof in FLSA Exemption Challenges?

A recent decision by the U.S. Supreme Court clarifies the evidentiary standard employers must meet when defending exempt classification challenges brought under the Fair Labor Standards Act. The ruling reminds employers that they bear the burden of proving that an exemption applies. Kristen Gallagher, Co-Chair of McDonald Carano’s Employment & Labor Law Practice, explains the court’s decision in the McDonald Carano Legal Alert provided below.

FLSA Exemptions: SCOTUS Sets Lower Burden-of-Proof

On January 15, the U.S. Supreme Court unanimously ruled in E.M.D. Sales Inc. v. Carrera that “preponderance of the evidence” is the standard of proof employers must meet to demonstrate an employee is exempt from minimum wage and overtime pay requirements under the Fair Labor Standards Act. The Court’s ruling reversed a 2023 order from the Fourth Circuit Court of Appeals that required a more stringent “clear and convincing evidence” standard that a position is overtime exempt. The Fourth Circuit’s ruling was an outlier from the “preponderance of the evidence” standard adopted in the Fifth, Sixth, Seventh, Ninth, Tenth, and Eleventh circuits. The ruling returned E.M.D. Sales Inc. back to the Fourth Circuit to apply the correct “preponderance of the evidence” standard. E.M.D. Sales, Inc. v. Carrera, No. 23-2172025 WL 96207 (U.S. Jan. 15, 2025).

E.M.D. Sales Inc. v. Carerra: Background and Procedural History
Three commission-based sales representatives at E.M.D. Sales Inc., a grocery distribution company, challenged their employer’s decision to classify them as exempt outside sales employees. Because the FLSA does not specify the employer’s burden of proof, this led to a dispute over the correct standard of proof to establish an exemption exists.

The employees filed suit in 2017 and, after a bench trial, the district court awarded them overtime wages and liquidated damages because the judge concluded that E.M.D. did not prove by clear and convincing evidence that the employees fell within the FLSA’s overtime exemption for outside sales workers. When the district court applied a higher burden, E.M.D. Sales appealed to the Fourth Circuit but the court affirmed the ruling. The Fourth Circuit Court of Appeals followed precedent in that circuit that already required employers to meet a clear and convincing evidence standard. E.M.D. Sales sought en banc review after the three-judge panel suggested reconsideration of that precedent may be warranted, the court later denied the request. E.M.D. Sales then sought review by the U.S. Supreme Court which reversed and remanded.

FLSA Exemption: Outside Sales

The FLSA requires employers to demonstrate that an exemption applies. E.M.D. Sales, Inc., 2025 WL 96207, at *2. The outside sales exemption at issue in E.M.D. Sales covers individuals who primarily make sales and regularly work away from the employer’s place of business. 29 U.S.C. § 213(a)(1). The district court found that “employees primarily executed the terms of sales already made rather than making new sales themselves.” E.M.D. Sales, Inc. 2025 WL 96207 at *3.

Preponderance or Clear and Convincing?

The FLSA does not specify a standard of proof for exemptions. See generally, 29 U.S.C. § 203 et seq. However, when a civil statute is silent, courts typically apply the preponderance of the evidence standard. E.M.D. Sales, Inc., 2025 WL 96207 at *1. Despite this general canon of construction, the key question in E.M.D. Sales was whether the more demanding clear and convincing evidence standard should apply to overtime exemption classification instead of the less stringent preponderance of the evidence standard.

What Does the Ruling Mean for Employers?

The Supreme Court’s decision settles a Circuit split on the applicable standard for employers to establish an FLSA exemption applies. The ruling is not limited to FLSA’s outside sales exemption and applies to the standard applicable to all FLSA exemptions. The ruling provides consistency for employers who have operations across various jurisdictions and allows for better predictability of outcomes when the same standard is applied regardless of location of operations. Nevertheless, the decision does not impact the underlying factors required to establish FLSA exemptions (for example, outside sales, executive, administrative, professional exemptions). Instead, the decision impacts the legal burden of proof.

Employers should continue to exercise diligence in evaluating whether positions meet the required applicable exemption requirements to avoid individual as well as class and collective action lawsuits.

About McDonald Carano

In 2024, McDonald Carano celebrated its 75ᵗʰ Anniversary of serving Nevada’s legal, business, government, and civic communities. More than 60 lawyers and government affairs professionals serve Nevada, national, and international clients from our offices in Reno, Las Vegas, and Carson City. McDonald Carano provides transactional, litigation, regulatory, and government affairs services to startups, corporations, private companies, trade associations, nonprofits, public entities, high-net-worth individuals, and family offices throughout Nevada. We are deeply committed to supporting local communities by volunteering our time, resources, and services, including pro bono legal services, to nonprofit organizations, charitable foundations, and public service entities. We are proud to be your Nevada law firm since 1949.

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Mark Buckovich

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Kristen T.
Gallagher

Partner Employment & Labor LawCo-Chair [email protected] Direct702.873.9966 Office702.873.4100 V-Card PDF (Print) Learn More »