S6 Ep123: The Supreme Court just made it easier for employers to deny overtime pay: EMD Sales, Inc. v. Carrera

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This episode is part of my initiative to provide access to important court decisions  impacting employees in an easy to understand conversational format using AI.  The speakers in the episode are AI generated and frankly sound great to listen to.  Enjoy!

The scales of workplace justice have just shifted. In a unanimous decision that has sent ripples through labor law circles, the Supreme Court has lowered the standard of proof employers need to demonstrate when classifying workers as exempt from overtime pay.

At the heart of this groundbreaking case lies EMD Sales, a food distributor whose sales representatives spent long 60-hour weeks stocking shelves, managing inventory, and processing orders at grocery stores across the Washington DC area. These employees, paid only on commission, sued for overtime compensation under the Fair Labor Standards Act (FLSA). EMD claimed they were "outside salesmen" – exempt from overtime requirements – but did their day-to-day responsibilities actually constitute "making sales"? The answer depended heavily on whether they were working at chain stores with pre-established corporate agreements or at independent shops where they had more sales autonomy.

The Supreme Court didn't rule on whether these particular workers deserved overtime. Instead, they focused on a crucial procedural question: what level of proof should employers need to show when claiming a worker is exempt? Previously, in the Fourth Circuit, employers needed to meet a high "clear and convincing evidence" standard. Now, the Court has established nationwide that only a "preponderance of evidence" – essentially just over 50% likelihood – is required. This seemingly technical change could significantly impact millions of workers' overtime eligibility and shift the power balance in workplace disputes across America.

The next time you're wondering whether your job qualifies for overtime protection, remember this watershed case. Understanding your rights has never been more important as the legal landscape evolves. Subscribe to our podcast for more deep dives into the court decisions that directly impact your workplace rights and compensation.

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Disclaimer: For educational use only, not intended to be legal advice.

Episode Transcript

Speaker 1 (00:00):
Welcome to the Deep Dive.
Today we're jumping into apretty significant legal battle,
one that actually made it allthe way to the Supreme Court.

Speaker 2 (00:08):
That's right.
It revolves around overtime pay, something a lot of people deal
with.

Speaker 1 (00:13):
We're focusing on a food distributor, emd Sales Inc.
And this big question shouldtheir sales representatives have
been getting overtime under theFair Labor Standards Act?
You know the FLSA?

Speaker 2 (00:24):
Exactly.
The core issue was whetherthese reps qualified for the
outside salesman exemption inthe FLSA.
If they did well, then EMDwouldn't owe them overtime.

Speaker 1 (00:36):
And these employees they sued right.
They argued they were puttingin something like 60 hours a
week.

Speaker 2 (00:40):
Yeah, long hours and paid only on commission.
No overtime pay.
Emd, of course, pushed backarguing no, they fit the
exemption.

Speaker 1 (00:47):
OK, so things kicked off in the courts.
The district court initiallysided with the employees.
They found EMD liable.

Speaker 2 (00:53):
And, crucially, they said EMD hadn't proven the
exemption by what's called clearand convincing evidence.
That's a pretty high bar.

Speaker 1 (01:00):
Right higher than the usual standard in civil cases.
The court also gave theemployees liquidated damages,
kind of like a penalty.

Speaker 2 (01:08):
But interestingly they didn't find EMD's violation
was willful, which meant ashorter two-year time frame for
those back wages.

Speaker 1 (01:17):
So neither side was totally happy.
Both appealed.

Speaker 2 (01:20):
Which took it to the Fourth Circuit Court of Appeals.

Speaker 1 (01:22):
Yeah.

Speaker 2 (01:23):
And they largely agreed with the first court.

Speaker 1 (01:25):
They upheld that decision.

Speaker 2 (01:27):
Uh-huh, they reinforced that clear and
convincing evidence was thestandard employers needed to
meet for FLSA exemptions, atleast in their circuit.

Speaker 1 (01:35):
But this is where it gets really interesting for
anyone following labor law.
The Supreme Court stepped in.

Speaker 2 (01:40):
And they flipped the script.
They reversed the FourthCircuit specifically on that
standard of proof.
This is the big development weneed to unpack.

Speaker 1 (01:48):
Absolutely.
Let's dig into how this allplayed out, starting back at
that first trial.
Tell us a bit about EMD.

Speaker 2 (01:53):
Sure so EMD sales.
They distribute food productsthink Latin American, caribbean,
asian foods mostly around theWashington DC area.

Speaker 1 (02:01):
And they deliver directly to stores.

Speaker 2 (02:03):
Yeah, a mix of big supermarket chains and smaller
independent grocery stores.
It's called a direct storedelivery model.

Speaker 1 (02:09):
OK, and what were these sales representatives
actually doing all day,according to the trial court?
I mean, Right.

Speaker 2 (02:15):
So they each had assigned routes covering both
types of stores.
Their jobs involved well, a lotof restocking shelves, making
sure products looked good,pulling expired or damaged stuff
.

Speaker 1 (02:25):
So inventory management almost.

Speaker 2 (02:28):
In large part.
Yes, they'd issue credits forremoved items and they use
handheld devices, pdas to submitorders for more stock.

Speaker 1 (02:36):
So the key question at trial was was their main job,
their primary duty, actuallymaking sales, as the FLSA
exemption requires?

Speaker 2 (02:45):
Precisely, and the answer seemed to depend heavily
on where they were working.

Speaker 1 (02:49):
Let's talk about the big chain stores first, places
like Walmart, safeway.

Speaker 2 (02:53):
Right For those EMD had corporate level agreements
already in place.

Speaker 1 (02:57):
Yeah.

Speaker 2 (02:57):
They negotiated which products would be sold, how
they'd be displayed using thesethings called planograms.

Speaker 1 (03:02):
Planograms Okay, like a map for the shelves.

Speaker 2 (03:05):
Kind of yeah and testimony from people at those
chains suggested the storemanagers on site.
They didn't have much power tochange things.
They couldn't really orderoutside of what corporate had
agreed to or what the planogramshowed.

Speaker 1 (03:19):
So the sales reps were basically just filling in
the blanks based on thesepre-existing deals.

Speaker 2 (03:26):
That seems to be how the district court saw it,
especially regarding the makingsales part.
They felt that just submittingan order to replenish stock
based on a preset planogramwasn't really making a sale in
the spirit of the exemption.

Speaker 1 (03:39):
OK, but what about the smaller independent stores?
Was it different there?

Speaker 2 (03:43):
It seems like it was.
But what about the smallerindependent stores?
Was it different there?
It seems like it was.
The reps apparently had morefreedom, more autonomy to
actually persuade the storeowner, make a sale, maybe even
sign up a new store as acustomer.

Speaker 1 (03:53):
But there was a catch there too.
Wasn't there Something aboutstorage?

Speaker 2 (03:56):
Yeah, one plaintiff mentioned that these smaller
stores often just didn't havethe space for the large
quantities EMD preferred to sell, so that might have limited the
actual volume of sales theycould make there.

Speaker 1 (04:05):
Interesting.
So, weighing all that, how didthe district court land on the
making sales issue overall?

Speaker 2 (04:16):
Well, they acknowledged sales were probably
happening at the independentshops, but for the chain stores,
where the reps spent most oftheir time, emd just hadn't
proven to that clear andconvincing standard.
Remember that the reps weremaking their own sales.

Speaker 1 (04:26):
They were executing sales, not necessarily creating
them at the chains.

Speaker 2 (04:29):
Exactly Filling orders based on existing
agreements wasn't enough.

Speaker 1 (04:33):
So the court concluded their primary duty
wasn't making sales Correct.

Speaker 2 (04:38):
They saw the main job as executing those prearranged
deals keeping shelves full, tidy, placing the replenishment
orders, even with some sales atIndependence.
The sheer time span it chainson these other tasks tipped the
balance.

Speaker 1 (04:52):
Got it.
And what about those liquidateddamages?
Why did the court award those?

Speaker 2 (04:56):
Because EMD couldn't show it acted in good faith or
had reasonable grounds to thinkit was complying with the FLSA.
The court even pointed out theCEO seemed unaware of what the
reps actually did day to day.

Speaker 1 (05:07):
Oof but not willful.
Why draw that line?

Speaker 2 (05:09):
The court saw the CEO's lack of knowledge as
negligent, maybe careless, butnot quite reckless disregard for
the law.
That difference is why theyused the standard two-year
statute of limitations, not thethree-year one for willful
violations.

Speaker 1 (05:25):
OK, so that sets the stage.
Then it goes up to the FourthCircuit.
What was their main focus?

Speaker 2 (05:30):
Their big focus was that standard of proof.
The Fourth Circuit what wastheir main focus?
Their big focus was thatstandard of proof.
They basically doubled down ontheir existing precedent Cases
like Shockley and Desmond.

Speaker 1 (05:38):
Right.
They confirmed that in theFourth Circuit employers had to
meet that higher clear andconvincing evidence bar to prove
an FLSA exemption.

Speaker 2 (05:46):
Yep.
Now EMD tried to argue thingsshould change.
They pointed to a Supreme Courtcase Encino Motorcars.

Speaker 1 (05:53):
Ah, the one that said FLSA exemptions shouldn't be
interpreted narrowly.

Speaker 2 (05:57):
That's the one.
Emd's logic was sort of likehey, if the exemptions
themselves aren't narrow, maybeproving them shouldn't require
such a high standard either.
Makes some sense.

Speaker 1 (06:05):
Right, you can see the argument, but the Fourth
Circuit didn't buy it.

Speaker 2 (06:10):
No, they drew a distinction.
They said interpreting thescope of an exemption is one
thing, but determining theburden of proof needed to show
someone fits that scope, that'sa different question.

Speaker 1 (06:20):
And they felt bound by their own prior rulings on
the burden of proof.

Speaker 2 (06:24):
Exactly.
They basically said unless ourfull court revisits this or the
Supreme Court tells us otherwise, clear and convincing is the
standard here.

Speaker 1 (06:33):
Which, of course, leads us directly to the Supreme
Court stepping in.

Speaker 2 (06:36):
And they did tell them otherwise.
Unanimously they reversed theFourth Circuit on the standard
of proof.

Speaker 1 (06:41):
Unanimous, wow.
And they said the standardshould be.

Speaker 2 (06:44):
The standard civil litigation burden.
Preponderance of the evidence.

Speaker 1 (06:48):
OK, explain that.
What's the court's reasoningfor lowering the bar?

Speaker 2 (06:52):
Well, their main point was that preponderance of
the evidence, basically meaningmore likely than not, is the
default standard in civillawsuits.
It has been since like 1938,when the FLSA was enacted.

Speaker 1 (07:04):
So it's the norm, not the exception.

Speaker 2 (07:05):
Right.
They said you only use a higherstandard, like clear and
convincing in specific unusualsituations, like if a law
explicitly requires it orthere's a constitutional reason,
or in rare cases involvingserious government action.
None of that applied here.

Speaker 1 (07:21):
And the FLSA itself is silent on the standard of
proof for exemptions.

Speaker 2 (07:25):
Correct.
It doesn't specify one.
So the Supreme Court said youjust use the default, the normal
civil standard.
They even compared it to TitleVII, employment discrimination
cases.

Speaker 1 (07:35):
Which also use the preponderance standard.

Speaker 2 (07:37):
Exactly.

Speaker 1 (07:38):
Now, the employees had arguments for keeping that
higher standard, didn't they?
What were those?

Speaker 2 (07:42):
They did.
They argued one that the FLSAprotects a strong public
interest, so a higher standardhelps ensure those protections
aren't easily skirted.

Speaker 1 (07:51):
OK, what else?

Speaker 2 (07:52):
Two, they pointed out that FLSA rights generally
can't be waived by employees,suggesting they're especially
important and should be harderto overcome.
And three, they raised apractical point Employers
usually control the evidence andemployees might lack resources.

Speaker 1 (08:06):
Those seem like reasonable points.
How did the Supreme Courtrespond?

Speaker 2 (08:09):
They addressed each one points.
How did the Supreme Courtrespond?
They addressed each one.
On the public interest point,they noted other laws with
public interest goals, likeTitle VII, still use
preponderance.
On the non-wavability point,they said waiving a right and
the standard for provingsomething are just separate
legal concepts.
And on the evidence controlemployee resources point.

Speaker 1 (08:28):
Let me guess they pointed back to Title VII again.

Speaker 2 (08:31):
You got it.
They said those same imbalancesoften exist in Title VII
discrimination cases, yetpreponderance is still the
standard there.

Speaker 1 (08:39):
So just to really nail this down preponderance of
the evidence.
That means the employer justhas to show it's slightly more
likely than not maybe 50.1%likely that the employee fits
the exemption.

Speaker 2 (08:51):
That's a good way to put it.
It's definitely a lower hurdlethan clear and convincing, which
implies a much higher degree ofcertainty.
It makes it easier, potentially, for employers.

Speaker 1 (09:01):
And, crucially, the Supreme Court didn't actually
decide if the EMD reps areexempt right.

Speaker 2 (09:05):
No, absolutely not.
They kicked the case back downto the Fourth Circuit.

Speaker 1 (09:09):
So the appeals court has to look at the facts again,
but this time using that lowerpreponderance standard.

Speaker 2 (09:15):
Exactly the ultimate question were these specific
employees truly outside salesmen?
That's still technically up inthe air, pending the Fourth
Circuit's review under the newstandard.

Speaker 1 (09:25):
OK, so let's talk impact.
What does this mean practicallyspeaking?
First, for employers andemployees in that Fourth Circuit
region Maryland, the Virginias,the Carolinas?

Speaker 2 (09:36):
Well for them.
The immediate impact is clear.
Employers arguing for FLSAexemptions now face a lower
burden of proof.
It should be easier for them towin those arguments than it was
under the clear and convincingstandard.

Speaker 1 (09:49):
And does this ripple outwards?
What are the broaderimplications?

Speaker 2 (09:52):
It certainly could.
Supreme Court decisions setprecedent nationwide.
Other circuits that might haveconsidered a higher standard or
were perhaps leaning that waywill now look to this ruling.
It could make it generally lessdifficult for employers across
many industries to classifyworkers as exempt.

Speaker 1 (10:07):
Potentially affecting a lot of workers' eligibility
for overtime pay.

Speaker 2 (10:11):
Potentially yes.
It's just the legal landscape abit in favor of the employer in
these specific exemptiondisputes.

Speaker 1 (10:19):
And it all still comes down to that definition of
outside salesman right Primary,doing making sales working away
from the main office.

Speaker 2 (10:26):
Absolutely, the definition hasn't changed, but
how you prove someone meets, itjust got well arguably easier
for the employer.
The factual question of whatconstitutes making sales got
well arguably easier for theemployer.
The factual question of whatconstitutes making sales versus,
say, merchandising or ordertaking remains central.

Speaker 1 (10:41):
Which brings up a tough question for you listening
how does this shift maybe alterthe balance between, you know,
a company's need to operate andan employee's right to get paid
fairly for their time?

Speaker 2 (10:51):
It's a fundamental tension in labor law and this
ruling definitely tilts thescale on the proof aspect.

Speaker 1 (10:56):
OK, so let's wrap this up.

Speaker 2 (10:57):
The key takeaway the Supreme Court has lowered the
standard of proof for employersclaiming FLSA exemptions from
clear and convincing evidencedown to the standard civil
preponderance of the evidence.

Speaker 1 (11:08):
Making it potentially easier for employers to
classify employees as exemptfrom overtime.

Speaker 2 (11:14):
Right and remember.
The EMD case itself isn'tfinished.
The Fourth Circuit needs toreevaluate the facts using this
new lower standard.

Speaker 1 (11:22):
This deep dive really shows the nuts and bolts of how
labor law gets interpreted andapplied, doesn't it?

Speaker 2 (11:27):
It really does.
If this caught your interest,you might want to look more into
those specific FLSA exemptions,not just outside sales, but
administrative professionalexemptions too.
Understanding what counts as aprimary duty is key.

Speaker 1 (11:41):
Definitely food for thought.

Speaker 2 (11:43):
And maybe one final thing for you to chew on With
this change potentially makingexemptions easier to prove, what
does that mean for employees?
Is there a greaterresponsibility now for you to
really understand your paystructure, your job duties and
your rights regarding overtime,and what might you need to do to
make sure you're being paidcorrectly?