Supreme Court rejects higher evidence standard for FLSA employer determinations

On January 15, 2025, the U.S. Supreme Court handed down a decision with far-reaching consequences for employers facing wage claims based on employee misclassification. The Court was tasked to decide whether a higher evidentiary requirement beyond the usual “preponderance of the evidence” standard should apply to an employer’s categorization of its employees as exempt under the Fair Labor Standards Act (FLSA). Writing for a unanimous Court, Justice Brett Kavanaugh held there was no basis in the FLSA for holding employer classification decisions to an unusually strict standard.

FLSA background

The FLSA imposes federal minimum wage and overtime requirements on employers, but many types of employees are exempt from these requirements, including outside salespeople—the category of employees under review in the case before the Court.

Employers are tasked with determining which employee classifications are exempt or nonexempt in accordance with regulations issued by the Department of Labor (DOL). Misclassification is a significant concern for employers because, in the event they make an incorrect classification decision, they will be liable for unpaid overtime, back pay, and liquidated damages for up to a three-year period in certain circumstances. In addition, they may be liable to pay the attorneys’ fees of employees who bring litigation to recover the unpaid wages.

Weighing burden of proof