The Supreme Court issued an opinion on January 15, 2025, in EMD Sales, Inc. v. Carrera, addressing a key question about the Fair Labor Standards Act's outside sales exemption and the burden of proof employers must meet to deny overtime pay to certain employees.
The case centers on EMD Sales, a food distribution company operating in the Washington, D.C., area that employs sales representatives who manage inventory and take orders at grocery stores. Several of these sales representatives filed suit against EMD, alleging the company violated the FLSA by failing to pay them overtime compensation for hours worked beyond the standard 40-hour work week.
The Fair Labor Standards Act, enacted by Congress in 1938, establishes fundamental protections for American workers by guaranteeing a federal minimum wage for covered employees and requiring overtime pay for those working more than 40 hours per week. However, the law includes several exemptions from the overtime-pay requirement, including one for outside salesmen who primarily work away from their employer's place of business.
EMD argued that its sales representatives qualified for the outside sales exemption, which would relieve the company of any obligation to pay overtime compensation. Under the FLSA, the burden falls on the employer to demonstrate that an exemption applies to particular employees.
The case proceeded to a bench trial in federal district court, where the judge found EMD liable for overtime payments. Critically, the district court determined that EMD had failed to prove by clear and convincing evidence that its sales representatives were outside salesmen entitled to the exemption.
The evidentiary standard became the central issue on appeal. EMD contended that the district court erred by applying the clear-and-convincing-evidence standard when determining whether the outside sales exemption applied. Instead, the company argued that courts should use the less stringent preponderance-of-the-evidence standard, which would make it easier for employers to establish that the exemption applies to their workers.
The Fourth Circuit Court of Appeals, following established circuit precedent, addressed EMD's challenge to the burden of proof standard. The appeals court's decision ultimately prompted the Supreme Court to grant certiorari in the case, which was argued before the justices on November 5, 2024.
The distinction between these evidentiary standards carries significant practical implications for both employers and employees. Under a preponderance-of-the-evidence standard, an employer need only show that it is more likely than not that an employee qualifies for an exemption. The clear-and-convincing-evidence standard requires a higher level of certainty and places a more demanding burden on employers seeking to avoid overtime obligations.
The outside sales exemption has been a frequent source of litigation as employers and employees dispute whether particular job duties and work arrangements qualify workers for exemption from overtime protections. The exemption typically applies to employees whose primary duty is making sales or obtaining orders for services, and who customarily and regularly work away from their employer's place of business.
Sales representatives in various industries have challenged their classification as exempt employees, arguing that their duties do not meet the criteria for the outside sales exemption. These cases often involve detailed analysis of employees' actual job responsibilities, time allocation, and work locations.
The Supreme Court's decision in EMD Sales v. Carrera will provide important guidance to lower courts grappling with similar disputes over FLSA exemptions. The ruling will clarify the appropriate burden of proof standard that employers must meet when claiming that workers are exempt from overtime pay requirements.
The case also reflects broader tensions in employment law over the scope of FLSA protections and exemptions. As work arrangements evolve and job duties become more complex, courts must determine how to apply decades-old statutory language to contemporary employment relationships.
For food distribution companies and other businesses employing sales representatives, the Court's decision will establish clear parameters for defending against overtime claims. The ruling will also influence how employers structure compensation packages and classify workers in sales-related positions.
The preliminary print of the Supreme Court's opinion indicates that the decision will be published in Volume 604 of the U.S. Reports. As is standard practice, the preliminary version is subject to formal revision before final publication in the bound volume.
The outcome of EMD Sales v. Carrera will join a body of Supreme Court precedent interpreting the Fair Labor Standards Act and its various exemptions, providing guidance for the millions of American workers whose overtime rights depend on proper application of these complex provisions.