Supreme Court Simplifies Employer Obligations for FLSA Exemption Compliance

Supreme Court Gives Employers a Win by Overturning the Fourth Circuit

The U.S. Supreme Court recently clarified the standard of proof employers must meet to establish that workers are exempt from the Fair Labor Standards Act (“FLSA”) overtime requirements.  In doing so, it overturned a decision by Fourth Circuit Court of Appeals, which covers Virginia, that required employers to meet a “clear and convincing” standard when justifying classification of an employee as exempt.  Under this relatively high standard, employers had to show that the evidence made it highly probable or reasonably certain that the employee was exempt.

In its decision, the Supreme Court ruled that employers only need to prove exemptions by a “preponderance of the evidence.”  This standard aligns with the general evidentiary threshold in civil cases, requiring only that employers prove that it is more likely than not that the exemption applies.

What This Means for Employers

For business owners and HR professionals, this decision simplifies the process of defending employee classification decisions in wage and hour disputes. The Fourth Circuit placed a higher burden for employers to prove exemptions, such as those for executive, administrative, and professional employees.

With this ruling, Virginia employers, like employers in other states, face a uniform and less stringent evidentiary standard when justifying classifying employees as exempt. However, it is essential to note that while the burden has been reduced, the responsibility to correctly classify employees remains significant. Misclassification can result in costly lawsuits, back wages, and penalties.

While the uniform “preponderance of the evidence” standard is more employer-friendly, it is still important to ensure that any claimed exemptions meet the detailed FLSA requirements.  Employers should continue to maintain proper records, including job descriptions and clear evidence of employee duties and salary levels. They should also periodically review their employee classifications to ensure compliance. Employers can minimize misclassification risks by performing regular FLSA audits, training their HR teams, and consulting legal experts.

Jeff Wilson is a Pender & Coward attorney focusing his practice on employment law matters, including counseling and business litigation.