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Horton Law Firm Blog SCOTUS May Change Standard of Proof for FLSA Misclassification Claims

 | SCOTUS May Change Standard of Proof for FLSA Misclassification Claims

For FLSA misclassification claims, a key issue is the burden of proof. When companies hire new employees, the company will determine whether the employee is entitled to overtime pay for all hours worked over 40 in a workweek (this is called “non-exempt”) or whether the employee is NOT entitled to overtime pay no matter how many hours the employee works (this is call “exempt” from overtime pay). If the company misclassifies the employee as exempt (not getting OT), either deliberately or accidentally, then the employee has the right to bring a lawsuit in state or federal court alleging that the company should have paid overtime pay because the employee was misclassified.

What Is the Standard of Proof for FLSA Misclassification Claims Currently?

For all cases, an important question is what standard of proof will apply to the claims the plaintiff has raised. At trial, the jury will be instructed as to the standard of proof. In most civil cases, including employment cases, the standard of proof is called “preponderance of the evidence,” which means the employee must show that the company more likely than not violated the law. In criminal cases, the the defendant can only be convicted beyond a reasonable doubt, which is a much higher standard of proof. And in between those standards lies one called “clear and convincing evidence.”

For an employee who was not paid overtime under the Fair Labor Standards Act (FLSA) and brings a lawsuit against the company, the burden actually lies with the COMPANY to prove that the employee was NOT entitled to overtime (i.e., whether the company’s claimed exemption from the overtime requirements was proper). And in the Fourth Circuit Court of Appeals (which includes South Carolina), the company must establish that the exemption applies by clear and convincing evidence. Because this is a higher and more difficult burden to reach, it can be a little easier on employees to win FLSA misclassification claims.

However, not all federal circuits follow the same standard for FLSA misclassification claims. Several other circuits follow the preponderance of the evidence standard. Because federal courts across the country disagree, this results in what is called a “circuit split.” Many times, the U.S. Supreme Court will decide cases that involve a circuit split to provide for more uniform legal results across the country.

Supreme Court Has Agreed to Hear a Case from the Fourth Circuit on this Same Standard of Proof Issue

Earlier this week, the Supreme Court took its first step in resolving a circuit split involving this same standard of proof issue for FLSA misclassification cases. In E.M.D. Sales v. Carrera, the Fourth Circuit held that the lower court had properly applied a clear and convincing standard of proof to the underlying FLSA claims brought by several salespeople working for the company. In that case, the sales employees alleged that the outside sales exemption did not apply to them, and thus, they should have been paid overtime pay since they regularly worked 60 hours a week or more.

For an outside sales exemption to apply, the employee must have the primary duty of making sales or obtaining contracts for services, and this must take place away from the company’s offices (i.e., out in the field). In this case, the salespeople would go to both independent stores and chain stores as part of their duties, but the evidence showed that the salespeople did not really make sales at the chain stores, since those contracts were negotiated at a much higher level. Only at the smaller independent stores did the employees have any autonomy to make sales as would be defined under the FLSA regulations. Thus, the primary duty did not qualify as making sales. The trial court judge held therefore that the exemption for outside sales did not apply and that the employees were entitled to overtime pay. As noted above, the Fourth Circuit Court of Appeals affirmed the decision and agreed that the clear and convincing evidence standard was appropriate.

Now, however, the Supreme Court will now weigh in and determine for all courts across the country whether that standard is correct or not. The Court won’t hear the case until next term (starting in October 2024), so we likely won’t get a ruling until late in 2024 or Spring 2025.

Takeaways for South Carolina Employees

It’s also interesting to note that the Supreme Court asked the federal government to provide its position on this issue, and the U.S. government agreed with the company that the standard of proof should be set as a preponderance of the evidence. If the Court decides to apply that standard, then it will become easier for companies to claim an exemption and not pay employees overtime pay when they work more than 40 hours a week.

I regularly meet with employees to determine whether they have been a victim of wage theft by being improperly classified as exempt from overtime pay. The key issues are always (1) pay and (2) duties. In order to be exempt, the employee must be paid a salary of at least $684 a week AND the employee’s duties must fall into one of the categories under the FLSA, which are normally managerial/executive, administrative, or professional duties. If the company can’t prove payment of salary OR that the duties requirement is met, then the employee is entitled to overtime pay.

Of course, even the salary requirement may be changing at some point soon. As I wrote about recently, the U.S. Department of Labor has issued a new rule, effective July 1, 2024, that would raise the salary amount to $844 a week. That rule is being challenged in court, so we’re not sure yet whether it will go into effect or not.

At the very least, if a South Carolina has any questions about an FLSA misclassification for overtime pay, then it’s always a good idea for the employee to reach out to an FLSA misclassification lawyer (like me!) for a fact-intensive review of your situation.

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