In my previous two columns I discussed seasonal and holiday issues that employers may face. Here it is early December, and I am already looking forward to the new year. In this article, I will briefly recap cases from the United States Supreme Court’s last term that may affect employers, and I will look forward to cases pending in the current term of which employers should be aware.

In Muldrow v. City of St. Louis, Missouri (April 17, 2024), the Supreme Court unanimously held that a police sergeant alleging the City discriminated against her by transferring her to a less desirable position did not need to show that the transfer resulted in significant, serious, substantial or any heightened level of harm to prove discrimination. It was sufficient that the transfer resulted in some harm to Ms. Muldrow.

This case bears watching. The holding applied narrowly to discriminatory job transfers, but it may apply more broadly to other workplace discrimination claims. And while the Supreme Court’s decision was unanimous, the justices issued multiple concurring opinions on how to define and measure the correct measure of harm.

The big case this year was not an employment case, but it may significantly affect rules issued by federal agencies that apply and enforce federal workplace laws. In Loper Bright Enterprises v. Raimondo (June 28, 2024), the Supreme Court struck down the longstanding “Chevron deference” standard. In the 1984 case, Chevron USA Inc. v. Natural Resources Defense Council Inc., the Supreme Court held that when a statute was ambiguous or had not directly addressed an issue before the court, the court should defer to a federal agency’s permissible interpretation of the statute. This standard brought consistency to judicial review of agency rules and actions, but it allowed federal agencies significant power to set workplace regulations.

Under Loper Bright’s new standard, courts must exercise their independent judgment in deciding whether an agency has acted within the authority granted by the statute in question and may not defer to an agency interpretation of the law simply because the statute is ambiguous. Federal agencies have relied in the past on Chevron deference to issue broad rules on workplace matters that many observers feel reach far past what Congress intended in passing workplace legislation.

Employers and employer organizations are expected to challenge broad regulations such as the Department of Labor’s new rules on tip pooling, overtime, the classification of workers as independent contractors and the National Labor Relations Boards definition of joint employment.

Now, let us move ahead to the current term.

In E.M.D. Sales Inc. v. Carrera, the Supreme Court will examine what evidence an employer must show to prove the employer properly classified an employee as exempt from the Fair Labor Standards Act’s minimum wage and overtime pay requirements. Employers frequently ask me to review jobs to determine whether the employee filling the position should be non-exempt and receive overtime pay for hours worked over 40 in a workweek or if the employee can be classified as exempt from receiving overtime pay. I always remind employers that the burden is on them to prove an exemption applies, and if in doubt, the employer should classify the employee as non-exempt to avoid expensive liability for back wages and legal fees.

But what is that burden? The Fourth Circuit held in the current case that an employer must show “clear and convincing” evidence that an exemption applies to an employee. To the contrary, several other federal appeals courts, including the Tenth Circuit in which we reside, hold that the employer only needs to show a preponderance of evidence to support the classification. This is the normal standard of proof in a civil case seeking monetary damages. The Supreme Court will resolve this conflict.

Most court observers believe the Supreme Court will overturn the heightened burden the Fourth Circuit places on employers defending employee-classification decisions. Even the Biden administration, normally deferential to employee claims, has filed a brief with the Court asking it to overturn the Fourth Circuit.

Employers may remember that in 2016, a Texas federal court stopped implementation of a Department of Labor (DOL) rule that would have significantly increased the salary required to support classification of an employee as exempt. The court questioned whether the FLSA allowed any salary-level test since the FLSA never mentions a salary-level test, only requiring that an employer pay an exempt employee on a salary basis and perform duties sufficient to support exempt status. Not to be deterred, the DOL proposed a more modest increase to $684 per week that survived a court challenge, was upheld by the Fifth Circuit just this year, and is still in effect.

But the DOL is back. A new DOL rule that would have again significantly increased the salary threshold for exemption would have taken effect on Jan. 1, 2025, but again, a Texas district court vacated the rule on Nov. 15, 2024, in Texas v. Department of Labor. The court acknowledged that the Fifth Circuit decision allowed some minimum salary-level test. But the court held the pending rule effectively eliminated the duties test, established by the FLSA, and replaced it with a salary-level test not established by the FLSA. The court cited Loper Bright, discussed above, and stated that where an agency’s authority is ambiguous, “abdication in favor of the agency is least appropriate.”

Colorado is one of six states that sets its own salary-level test far higher than the federal standard. But Colorado employers will still watch whether the DOL appeals this case to the Supreme Court and whether the Supreme Court continues to limit deference to federal agencies that set and enforce workplace standards.