SCOTUS: Employers have a lower burden of showing an employee is exempt

On January 15, the U.S. Supreme Court, in E.M.D. Sales, Inc., et al. v. Carrera, resolved a split in the lower courts on whether employers had to have a higher threshold of “clear and convincing evidence” or a “preponderance of evidence” to show that employees are exempt from the overtime provisions of the federal Fair Labor Standards Act (FLSA). In a win for employers, the high court found that only the lower “ponderance” threshold was needed.

The FLSA has a handful of exemption categories. These include employees who are paid on a salary basis that exceeds the FLSA’s minimum salary requirements and who perform executive, administrative, or professional duties, as well as outside sales, and certain computer-related duties.

Surprising as it might seem to some employers, job titles do not determine exemption status.

For executive, administrative, and professional (“white collar”) employees, employers must be able to prove that the employees:

1. Are paid on a salary basis (paid the same amount each week regardless of the amount of work done);
2. Are paid at least a salary of $684 per week; and
3. Meet certain duties tests.

Computer employees must be paid at least $27.63 per hour. To qualify for the outside sales exemption, the employer must ensure that:

• The employee's primary duty is making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
• The employee must be customarily and regularly engaged away from the employer's place or places of business.

The salary requirements don’t apply to the outside sales exemption, meaning employers don’t have to pay these employees a certain salary — they could be paid straight commission, for instance, thus their income could fluctuate based on how much they sell.

If employers can show that employees meet all three criteria, they don’t have to pay those employees overtime for any hours worked beyond 40 in a workweek. They are also relieved of paying employees the federal minimum wage of $7.25 per hour for all hours worked and they don’t have to keep track of the hours exempt employees work.

The SCOTUS decision does not change employer responsibilities under the FLSA on classifying employees as exempt or nonexempt. It just clarifies what evidence employers must show in court to prove that their classification was correct.

Key to remember: The U.S. Supreme Court gave employers a break by lowering the burden of how they prove why they classified employees as exempt under the FLSA.