It is always the employer’s burden of proof to prove an exemption under the Fair Labor Standards Act (FLSA), but there is controversy over what that evidentiary standard should be. In a recent case, a federal appellate court has ruled that the correct standard is “clear and convincing” which is an extremely high standard. However, that same Court made mention that this standard may need to change or evolve, and it may take the Supreme Court to do that. The case is entitled Carrera v. EMD Sales, Inc. and issued from the Fourth Circuit Court of Appeals.

In this case, three sales representatives sued, claiming they were due overtime. The employer defended by asserting these workers were exempt as outside sales employees. The DOL regulations require that to meet the exemption, the employees must “make sales” and “customarily and regularly” work outside of their employer’s place of business.

The plaintiffs argued for application of the “clear and convincing” standard. The defendant, relying upon the recent US Supreme Court decision in Encino Motorcars, LLC v. Navarro, urged that this standard was now outdated, and the proper standard was, in keeping in line with the “fair reading” concept enunciated in Encino, an “easier” “preponderance of the evidence” standard. The district court noted that Encino Motorcars did not set forth an evidentiary standard for satisfying the exemption and thus it stuck with the “clear and convincing” test. Under that test, the court found for the plaintiffs but held the violation was not willful, limiting recovery to only two years.

The Court of Appeals acknowledged that the Supreme Court’s decision in Encino Motorcars gave some credence to the defendant’s argument. However, the Court could not deviate from the precedent in the Circuit because it could not “lightly presume that the law of the Circuit has been overturned.” The Court also agreed with the lower court that there was a qualitative difference between a burden of proof to show the exemption and the statutory interpretation of what the exemption meant. Thus, the Court held that it was “entirely possible” to interpret the Circuit’s precedent in consonance with the Encino Motorcars holding.

The Takeaway

This appellate panel recognized that the Supreme Court will have to resolve this crucial issue as there is a split in the Circuits. I believe the clear and convincing standard is too high, too onerous a burden for an employer to meet, while the preponderance standard is more in line with the FLSA regulations themselves which note that someone doing exempt work 51% of the time qualifies for an exemption, Such a holding woud crystallize the “fairness” concept emanating from Encino Motorcars.

That would be, to use a word, “fair”…

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