Robert Quackenboss is a companion at Hunton Andrews Kurth LLP. Tyler Laughinghouse is an affiliate on the agency.
On Nov. 5, the U.S. Supreme Courtroom will take up a wage and hour case, E.M.D. Gross sales, Inc. v. Carrera, to make clear a circuit break up concerning the usual of proof that employers should meet to indicate that workers are exempt from the minimal wage and extra time necessities of the Honest Labor Requirements Act.
The FLSA requires most U.S. workers be paid not less than the federal minimal wage for all hours labored and obtain extra time pay for every hour labored over 40 hours in a given workweek, until the worker falls into a number of of the FLSA’s numerous exemptions.
Whereas it isn’t disputed that employers bear the burden of proving that workers fall inside a selected FLSA exemption, the Supreme Courtroom agreed to listen to Carrera to make clear the exact burden of proof that employers want to fulfill to fulfill that burden. This forthcoming resolution (anticipated Spring 2025) might have nationwide implications for employers within the retail business and past.
The Carrera resolution
In Carrera, three gross sales representatives filed a lawsuit alleging their employer violated the FLSA by failing to pay them extra time wages once they labored greater than 40 hours per week.
The employer didn’t dispute that the gross sales representatives labored for greater than 40 hours per week however argued they weren’t entitled to extra time wages as a result of they have been exempt underneath the FLSA’s “exterior gross sales” exemption. Following a nine-day bench trial, a district courtroom dominated in favor of the workers, holding that the employer did not show the workers fell inside the “exterior gross sales” exemption “by clear and convincing proof.”
On attraction, the 4th U.S. Circuit Courtroom of Appeals affirmed the district courtroom, discovering it utilized the proper authorized customary. Particularly, the appeals courtroom held that, underneath its long-standing precedent, employers have the burden to show that their workers fulfill the FLSA’s exemptions by “clear and convincing proof,” somewhat than by the much less stringent “preponderance of the proof” customary utilized by different circuit courts.
In doing so, the 4th Circuit acknowledged that its utility of the “clear and convincing customary” was at odds with different circuit courts and even urged that its customary (first developed in 1993) may be outdated in gentle of the Supreme Courtroom’s 2018 resolution in Encino Motorcars LLC v. Navarro, the place the Excessive Courtroom rejected the then-long-standing precept that FLSA exemptions ought to be “narrowly construed” in favor of a more-relaxed customary that offers the FLSA exemptions a “truthful studying.”
The 4th Circuit, nevertheless, held that as a result of the Supreme Courtroom’s resolution in Navarro didn’t particularly tackle the relevant burden of proof, it was certain by its prior precedent that the “clear and convincing proof” customary utilized. Following the panel’s resolution, the 4th Circuit denied a request for en banc evaluate.
A circuit break up
The 4th Circuit’s “clear and convincing” customary conflicts with seven different circuit courts, together with the fifth, sixth, seventh, eighth, ninth, tenth and eleventh Circuits — every of which apply the much less demanding “preponderance of the proof” customary.
Certainly, the sixth, seventh and tenth Circuits have expressly thought-about and rejected the applicability of the “clear and convincing proof” customary.
Thus far, the 4th Circuit is the one circuit courtroom to require employers to fulfill this heightened customary, and its place has acquired widespread criticism.
In truth, even the U.S. Division of Justice has known as on the Courtroom to “summarily reverse” the 4th Circuit’s resolution, opining in its amicus transient that the error was so apparent that “the Courtroom needn’t expend the assets required for plenary evaluate.”
In doing so, DOJ argued that, not solely does the 4th Circuit’s resolution battle with all the different circuit courts which have addressed the problem, however the “clear and convincing proof” customary is unsupported by the FLSA’s statutory textual content and is “inconsistent with [the U.S. Supreme] Courtroom’s precedent, which has lengthy acknowledged that such a heightened customary of proof shouldn’t be utilized to strange civil circumstances looking for financial treatments.”
The Supreme Courtroom’s forthcoming resolution
Many suspect that the Supreme Courtroom will overturn the 4th Circuit’s resolution and formally undertake the less-demanding “preponderance of the proof” customary, particularly given the Courtroom’s current pattern of employer-friendly FLSA selections.
As famous above, for instance, the Courtroom delivered a decisive victory to employers in Navarro, the place it held that the FLSA’s exemptions ought to be given a “truthful studying” versus a slender development. That facet of the Navarro resolution was largely surprising and overturned a long time of decrease courtroom precedent narrowly construing the FLSA’s exemptions in gentle of the FLSA’s remedial goal.
This case additionally comes at a time when company motion has come underneath elevated scrutiny from the Courtroom. Certainly, its current pair of selections in Loper Vivid v. Raimondo and Relentless, Inc. v. Dep’t. of Commerce, wherein the Courtroom overturned the longstanding Chevron deference doctrine, have reset the regulatory panorama and have opened the door for extra sturdy challenges to company rulemaking and different actions.
Taken collectively, the Supreme Courtroom seems poised to overrule the 4th Circuit and to make clear that the “preponderance of the proof” customary is the relevant authorized check in FLSA exemptions circumstances.
