Cases & Developments

Opinion and Order Reversing the judgment of the Court of Appeals and Remanding. Sales representatives of petitioner, a distributor of food products, sued the company alleging it failed to pay them overtime in violation of the Fair Labor Standards Act (FLSA). The District Court applied a heightened “clear and convincing evidence” standard to the company’s argument that the sales representatives fell within the FLSA’s outside-salesman exemption. On appeal, the company argued the District Court should have applied the less stringent “preponderance-of-the-evidence standard.” The Fourth Circuit disagreed and affirmed judgment in favor of the sales representatives. The U.S. Supreme Court granted certiorari to consider which standard applies when an employer seeks to demonstrate that “an employee is exempt from the minimum-wage and overtime-pay provisions of the FLSA.” In concluding that the preponderance-of-the-evidence standard applies, the Court reasoned that a heightened standard is only required in civil cases when either the U.S. Constitution or a statute establishes the requirement, or in rare “uncommon” cases when the government undertakes “unusual coercive action” such as removal of an individual’s citizenship. The Court found that (1) the FLSA is silent as to a standard of proof for exemptions, (2) the Fourth Circuit is alone in requiring employers to prove the applicability of FLSA exemptions by the clear and convincing standard, and (3) it previously applied a preponderance standard in Title VII employment-discrimination cases. Therefore, the Court held that “the default preponderance standard governs when an employer seeks to prove that an employee is exempt under the Fair Labor Standards Act.”  

Memorandum and Order granting Summary Judgment and Vacating Final Rule. Plaintiffs, the State of Texas and a coalition of trade associations and employers, contend the 2024 Rule changes to salary level for Employee Assistance Program (EAP) Exemption set by the U.S. Department of Labor (DOL or the Department) exceed the Department’s authority under the FLSA. In granting summary judgment, the court found that “the 2024 Rule exceeds the Department’s authority and is unlawful,” and also ruled the DOL’s “salary only” test reflected a return to the 2016 Rule which was found to be in tension with the FLSA and was overruled. The court reasoned that the Rule’s proposed salary increase from $43,888 to $58,656 annually beginning January 1, 2025, departed from the established metric, and would result in an additional three million workers becoming nonexempt. The court was also persuaded by plaintiffs’ claim that the 2024 rule was an unlawful exercise of agency power under the Administrative Procedures Act (APA), and thus, concluded that the Rule exceeded permissible construction of 213(a)(1), “effectively eliminat[ing] consideration of whether an employee performs bona fide executive, administrative, or professional capacity duties in favor of what amounts to a salary-only test.” The court further found that the Department exceeded its scope regarding the proposed automatic indexing mechanism, writing “nothing in the EAP Exemption authorizes the Department to set its rulemaking on autopilot and evade the procedural requirements of the APA,” and that “automatically increasing the minimum salary thresholds every three years also violates the notice-and-comment rulemaking requirements.” Keep an eye on your in-box for upcoming NACUA programming on this developing issue!