Tag Archives: Pizza Hut Delivery Drivers

D.Colo.: Pizza Hut Delivery Drivers’ Minimum Wage Claims, Premised on Claim That Defendants Failed to Reasonably Estimate Vehicle-Related Expenses for Reimbursement Can Proceed; Defendants’ Motion to Dismiss Denied

Darrow v. WKRP Management, LLC

This matter was before the Court on the defendants’ motion to dismiss plaintiff’s second amended complaint.  Plaintiff, a Pizza Hut delivery driver, alleged that defendants, Pizza Hut franchisees, violated the Fair Labor Standards Act (“FLSA”) and the Colorado Minimum Wage of Workers Act (“CMWWA”) by failing to reasonably approximate his automotive expenses for reimbursement purposes, and thereby, failing to pay him minimum wage.

Significantly, defendants paid plaintiff and opt-in plaintiffs at or near the Colorado minimum wage from 2007 to 2009.  According to the court, on average, the plaintiff and opt-in plaintiffs delivered two to three orders per hour and drove five miles per delivery.  Plaintiff alleged that defendants required their delivery drivers to ‘maintain and pay for safe, legally-operable, and insured automobiles when delivering WKRP’s pizza and other food items.’  Defendants reimbursed Plaintiff between $0.75 and $1.00 per delivery for the vehicle expenses incurred by plaintiff to make deliveries. Plaintiff alleged that it was defendants’ policy and practice to unreasonably estimate employees’ automotive expenses for reimbursement purposes, which caused Plaintiff and other similarly situated individuals to be paid less than the federal minimum wage and the Colorado minimum wage from 2007 to 2009 in violation of the FLSA and the CMWWA.

Rejecting defendants’ argument that plaintiff failed to state a claim for unpaid minimum wages under these facts, the court looked to the section 7(e)(2), which states that an employee’s regular rate does not include travel or other expenses incurred in furtherance of the employer’s interest:

“The FLSA provides a definition for “wages,” but does not address an employer’s reimbursement of expenses. However, “[Department of Labor] regulations are entitled to judicial deference, and are the primary source of guidance for determining the scope and extent of exemptions to the FLSA,” including expense reimbursement. Spadling v. City of Tulsa, 95 F.3d 1492, 1495 (10th Cir.1996). Therefore, the Court will look to the Department of Labor regulations to determine whether, under the FLSA, an employee may claim that his wages are reduced below the minimum wage when he is under-reimbursed for vehicle-related expenses. Under 29 C.F.R. § 531.35, “the wage requirements of the [FLSA] will not be met where the employee ‘kicks-back’ directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee.” A kickback occurs when the cost of tools that are specifically required for the performance of the employee’s particular work “cuts into the minimum or overtime wages required to be paid him under the Act.” Id. Section 531.35 specifically incorporates § 531.32(c), which in turn incorporates § 778.217, which states:

Where an employee incurs expenses on his employer’s behalf or where he is required to expend sums solely by reason of action taken for the convenience of his employer, section 7(e)(2) [which provides that employee’s regular rate does not include travel or other expenses incurred in furtherance of the employer’s interest] is applicable to reimbursement for such expenses. Payments made by the employer to cover such expenses are not included in the employee’s regular rate (if the amount of the reimbursement reasonably approximates the expenses incurred). Such payment is not compensation for services rendered by the employees during any hours worked in the workweek.  29 C.F.R. § 778.217(a). In Wass v. NPC International, Inc. (Wass I), 688 F.Supp.2d 1282, 1285–86 (D.Kan.2010), the court concluded that these regulations “permit an employer to approximate reasonably the amount of an employee’s vehicle expenses without affecting the amount of the employee’s wages for purposes of the federal minimum wage law.” However, if the employer makes an unreasonable approximation, the employee can claim that his wage rate was reduced because of expenses that were not sufficiently reimbursed. Id. at 1287.

Plaintiff alleges that his under-reimbursed vehicle expenses constituted a kickback to Defendants because Defendants failed to reasonably approximate Plaintiff’s vehicle-related expenses and Plaintiff was specifically required to use and maintain a vehicle to benefit Defendants’ business. Plaintiff further alleges that Defendants’ unreasonable approximation of Plaintiff’s vehicle-related expenses led to Plaintiff’s wage being reduced below the minimum wage.

Defendants argue that Plaintiff cannot use an estimated mileage rate as a substitute for actual vehicle-related expenses. Without pleading his actual expenses, Defendants contend that Plaintiff is unable to prove (1) that Defendants’ reimbursement rate was an unreasonable approximation, and (2) that Defendants paid him below the minimum wage as a result of the under-reimbursement. Plaintiff responds that he does not have to produce his actual automotive expenses in order to state a claim under the Iqbal and Twombly standard because he can raise the plausible inference that Defendants’ approximation of his vehicle-related expenses was unreasonable without knowing his actual expenses. For the following reasons, the Court finds that Plaintiff’s Amended Complaint meets the pleading standard under Iqbal and Twombly.”

After a recitation of the applicable law, the court held that plaintiff had sufficiently pled his estimated costs of running his vehicle, using a variety of facts, including the reimbursement rate paid by defendants versus the IRS’ mileage reimbursement rate.  Further, when taken together with plaintiff’s hourly wages, he had sufficiently pled that defendants failed to pay him at least the federal and/or Colorado minimum wage(s).  Therefore, the court denied defendants’ motion in its entirety.

Click Darrow v. WKRP Management, LLC to read the entire Order.

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