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Delivery Driver Employers May Avoid Minimum Wage Violations


Sep 29, 2020

In a new guidance, the U.S. Labor Department said that employers of delivery drivers have many options to avoid minimum wage violations while reimbursing the drivers for vehicle expenses. 

Addressing a major issue in the country that’s often the center of million-dollar lawsuit settlements, the DOL’s Wage and Hour Division said in an opinion letter that companies don’t need to adhere to a particular methodology in order to determine the total amount they must pay to their drivers to cover costs related to their personal vehicle.

Per the WHD’s letter, as long as the employee is reimbursed at a “reasonable approximation” of actual expenses, and said payments aren’t used to meet the employer’s minimum wage obligation, then the business would be in compliance with the Fair Labor Standards Act. This means that employers do not need to reimburse employees at the IRS mileage rate to meet their obligations under federal wage and hour laws.

In the letter, which was addressed to an unnamed food delivery company, the Division clarified that the company is only required to reimburse hourly drivers for expenses tied to the worker’s use of that vehicle for the employer, such as gasoline, periodic maintenance, and the depreciated value of the vehicle attributed to employees’ delivery trips. However, what wouldn’t be covered are the costs for driving that are for the employee’s benefit.

The letter also pointed out how there are often allegations surrounding food delivery companies failing to adequately reimburse drivers, which have resulted in class and collective actions. 

Wage and hour violations encompass one of the most common and serious workplace issues throughout the state of California. The 2017 Annual Workplace Litigation Report found that workplace class action settlements hit a total of $1.75 billion in 2016. Moreover, the settlement value tripled in 2016 for wage and hour litigation. This shows that employees that file lawsuits against their employers are having more success.

For example, this past June, a federal judge approved a $2.3 million settlement for New York Pizza Hut drivers after they had accused the four franchisees of owing them minimum wages because they didn’t cover their vehicle-related expenses. For reference, according to a poll cited by Pizza Magazine, 82% of recipients said they prefer to order directly from a restaurant, making it the preferred food delivery method over an app service. 

Most delivery drivers are paid a sub-minimum hourly wage rate, earning the remainder of their wages through tips. This arrangement, of course, benefits employers the most, who can pay less to the delivery drivers. Unfortunately, this complies with the FLSA, since delivery drivers in theory earn more than minimum wage for their efforts after accounting for tips. 

Another opinion letter concluded that employers may utilize the fluctuating workweek method to calculate overtime pay for workers whose hours fluctuates from week to week, regardless of whether they go both above and below 40 hours in different time periods.

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