In a unanimous decision on Wednesday, the U.S. Supreme Court ruled that employers seeking to classify workers as exempt from overtime pay under the federal Fair Labor Standards Act (FLSA) only need to prove their case by a "preponderance of the evidence," not the stricter "clear and convincing evidence" standard. The ruling, penned by Justice Brett Kavanaugh, resolves a circuit split and could impact numerous employment lawsuits, including class actions.

The case arose from a dispute involving EMD Sales, a grocery distributor, and three sales workers who argued that they were misclassified as "outside sales employees" under the FLSA, which exempts such workers from overtime pay requirements.

The employees, who filed a class action in 2017, claimed their primary duties were not sales but instead involved tasks such as stocking shelves, removing damaged items, and issuing credits to stores. After a 2021 bench trial, U.S. District Judge James Bredar in Baltimore ruled in favor of the employees, determining that their duties did not meet the FLSA exemption for outside sales workers.

Judge Bredar required EMD Sales to meet the higher "clear and convincing evidence" standard to justify the exemption. The 4th U.S. Circuit Court of Appeals upheld that approach in 2023, aligning with its precedent but diverging from six other appeals courts that applied the less stringent preponderance standard.

Justice Kavanaugh, writing for the court, rejected the 4th Circuit’s heightened burden of proof as inconsistent with the FLSA and broader legal principles. He emphasized that the "preponderance of the evidence" standard is the norm in civil cases unless a statute explicitly provides otherwise.

“Rather than choose sides in a policy debate, this Court must apply the statute as written and as informed by the longstanding default rule regarding the standard of proof,” Kavanaugh wrote.

The preponderance of the evidence and clear and convincing evidence standards represent different thresholds of proof used in legal cases to determine whether a party has sufficiently proven its claims. These standards are applied based on the nature of the case and the rights or interests at stake.

The preponderance of the evidence standard is the lower threshold of proof, requiring a party to show that their claims are more likely than not to be true. Often described as tipping the scales slightly in the claimant’s favor, it means that the evidence presented must simply outweigh the opposing party’s evidence by a margin greater than 50%. This standard is commonly used in civil litigation, including employment disputes, contract claims, and negligence cases. In the EMD Sales case, the Supreme Court ruled that employers seeking to prove that workers are exempt from overtime pay under the Fair Labor Standards Act (FLSA) only need to meet this standard, consistent with its general use in civil cases.

On the other hand, the clear and convincing evidence standard is a higher burden of proof. It requires a party to demonstrate that their claims are highly probable or reasonably certain. While not as rigorous as the "beyond a reasonable doubt" standard in criminal cases, this threshold demands a greater degree of certainty than preponderance of the evidence. This standard is often applied in cases involving significant rights or high-stakes issues, such as allegations of fraud, the termination of parental rights, or claims for punitive damages. The rationale for applying a heightened standard in these cases is to mitigate the risk of error, given the potentially severe consequences of an incorrect decision.

The Supreme Court rejected the 4th Circuit’s application of the clear and convincing evidence standard in the EMD Sales case, emphasizing that no statutory language justified its use in FLSA cases. The Court highlighted that preponderance of the evidence is the default evidentiary standard in civil litigation and found it to be appropriate for determining whether workers qualify as exempt under the FLSA. By distinguishing these standards, the Court underscored the importance of applying the appropriate level of proof based on the statutory framework and legal context of each case.

The court noted that heightened standards typically apply only in exceptional circumstances, such as cases involving constitutional rights or allegations of coercive government action, which were not relevant here.

The decision could provide relief for employers facing FLSA litigation by aligning the burden of proof with the majority of U.S. appeals courts. It reduces the evidentiary hurdle for companies defending their classification of workers as exempt under the FLSA.

At the same time, the ruling reinforces that workers still benefit from protections against misclassification, as employers must still prove that exemptions are justified.

The Supreme Court remanded the case to the 4th Circuit to determine whether the plaintiffs’ job duties qualified them as outside sales workers under the correct legal standard.

The ruling is significant for industries heavily reliant on outside sales employees, such as retail, distribution, and pharmaceuticals. It also underscores the importance of accurate employee classification to avoid costly litigation and potential liability for unpaid overtime.