By: Rachel Myers
Krass Monroe, P.A.
Are you, as a delivery business, adequately reimbursing your delivery drivers for the travel expenses they incur in making deliveries? Dominos Pizza (Dominos) was recently sued by a group of its current and former delivery drivers (Drivers) in Minnesota federal district court. The Drivers primarily asserted that Dominos failed to adequately reimburse them for their travel-related expenses, which resulted in the Drivers being paid less than the federal minimum wage and the Minnesota minimum wage. Because the Drivers allegations against Dominos have legal implications that could affect your delivery businesses, here is a summary of the Drivers claims against Dominos, the courts treatment of those claims, and practical advice on how to ensure you are in compliance with both federal and state employment law.
Dominos paid its Drivers a flat rate for reimbursement of the automobile expenses the Drivers incurred on a per delivery basis. The Drivers argued that the reimbursement was insufficient, and, as a result, Dominos was paying its Drivers less than the statutory minimum wage in violation of the Fair Labor Standards Act (FLSA) and the Minnesota Fair Labor Standards Act (MFLSA). Dominos argued that the Drivers should have been required to give Dominos notice of the insufficient reimbursement or provide Dominos with documentation that quantified their excess expenses before being able to file the lawsuit. However, the court determined that neither FLSA nor MFLSA required the Drivers to give Dominos notice of their insufficient reimbursement and wages prior to filing suit.
Advice to Delivery Business Clients:
If you are paying your delivery drivers a flat rate for automobile expenses on a per delivery basis, you may not be sufficiently reimbursing your delivery drivers for the expenses they have actually incurred. As a result, you may be exposing yourself to potential claims for minimum wage violations under FLSA and your states employment laws. Since your delivery drivers are not required to give you notice of the allegedly insufficient reimbursement before pursuing federal claims (and possibly state claims) against you, it is important for you to be proactive. Talk to your delivery drivers, find out the actual amount of their automobile expenses, and set your flat rate at a level that adequately reimburses these expenses. To ensure your delivery drivers are being reimbursed for any expenses they incur above the flat rate, you may want to consider establishing a policy to allow for additional reimbursement. By requiring delivery drivers who claim expenses in excess of the flat rate to submit documentation quantifying these expenses, you can make sure your delivery drivers are being sufficiently reimbursed, and you can successfully avoid any potential claims for minimum wage violations.
The Drivers also argued that they were not being paid minimum wage because Dominos was unlawfully retaining the delivery charge that Dominos itemizes on its receipts and charges to all pizza delivery customers. The Drivers argued that the delivery charge should belong to them because, under Minnesota law, employers are prohibited from requiring employees to contribute or share a gratuity with the employer. Dominos argued that the delivery charge was not a gratuity under Minnesota law that belonged solely to the Drivers, but rather, was a service charge under federal law that belonged exclusively to Dominos.
The court found that, if Dominos was giving its customers sufficient notice that the delivery charge was being paid to Dominos and not to the Drivers, Dominos could lawfully retain the delivery charge under Minnesota law. However, without sufficient notice, the delivery charge would be considered a gratuity that Dominos must pay to the Drivers, in addition to Minnesotas mandatory minimum wage.
Advice to Delivery Business Clients:
Look to the laws of the state(s) where your stores are located to determine how service charges are treated. Do service charges belong to the delivery drivers, or do they belong to you as the employer? Do customers have to be put on notice that certain charges are retained by you, rather than being paid to the delivery drivers, in order for you to lawfully retain the charges? If you want to retain service and delivery charges, it would be wise to include a statement on the receipt, stating that these charges will not be paid to the delivery drivers. This notice will put drivers and customers alike on notice that you will be the recipient of these charges, provided that your states laws do not designate service charges as belonging to the delivery drivers. Another question to ask is, can the employers payment of the service charge to the employee be used to satisfy the states minimum wage requirement, or is it a payment that must be made in addition to the state minimum wage? The answers to these questions are necessary to determine your obligations with respect to both state and federal minimum wage requirements.
The court left open the issue of whether the net effect of unreimbursed travel expenses could result in the Drivers wages falling below the minimum wage. The Drivers argued that they were being paid less than minimum wage because their travel expenses, which Dominos failed to reimburse, exceeded $50. Under Minnesota law, the first $50 of employment-related expenses in a given pay period do not have to be reimbursed by the employer. Dominos argued that travel expenses were not subject to the $50 threshold for uniform or equipment, and that, in any event, expenses from a motor vehicle . . . which may be used outside the employment were specifically excluded. The court found that, since the Drivers alleged that the lack of reimbursement for their travel expenses resulted in their wages falling below minimum wage, the Drivers were allowed to pursue their claim against Dominos.
Advice to Delivery Business Clients:
While the courts have not finally decided the issue, be mindful of whether your drivers out-of-pocket employment-related expenses are causing their wages to fall below the minimum wage. Look to the employment laws of the state(s) where your stores are located to see if they have a dollar limitation similar to Minnesotas $50 limitation on unreimbursed deductions. Make sure you are maintaining accurate records of your delivery drivers employment-related expenses you are not reimbursing, such as the costs of uniforms or specially-designed clothing, equipment, supplies, and travel expenses. While state law may not require you to maintain records of your delivery drivers actual travel expenses, it may still be worthwhile to do so. As noted in Section 1 above, paying your drivers travel expenses may make the most sense to protect against claims similar to the ones made against Dominos.
Contact your legal advisor to make sure you understand your legal obligations. By being aware of employment issues faced by other delivery businesses, you can successfully ensure you dont drive employee wages below the minimum wage.
Rachel R. Myers is an attorney in the Litigation practice group at Krass Monroe, P.A. She can be reached at firstname.lastname@example.org.
For more information about Krass Monroe, P.A., visit http://www.krassmonroe.com/or http://www.primerus.com/law-firms/monroe-moxness-berg-pa-minneapolis-minnesota-mn.htm.
KM: 4823-0175-5396, v. 1
 Similar to Minnesota law, New York law provides that service charges are gratuities, which belong to the employees and cannot be retained by the employer, if the customer reasonably expects that such charge will be paid to the employee. See N.Y. Labor Law 196-d.
 You should also be mindful of tax implications when deciding how to pay your drivers travel expenses. Generally, reimbursement for travel expenses after they are incurred will likely not be considered income for the drivers and will not be taxable. However, payment of an allowance or a stipend for travel expenses before they are incurred will likely be deemed income for the drivers and will be taxable.