Domino’s franchisees had a rough last few weeks. In a matter of two days, two class action lawsuits were filed against Domino’s franchisees alleging that the franchisees had paid delivery drivers less than minimum wage.

One of the lawsuits was filed in Georgia against franchisees Cowabunga, Inc., Cowabunga Three Inc. and Cowabunga Four LLC, which operate about 100 stores in Georgia, Alabama and South Carolina. The other lawsuit was filed in California against Hishmeh Enterprises Inc., which operates 70 Domino’s franchise stores. The lawsuits attack the franchisees’ methods for reimbursing delivery drivers for the expenses incurred while delivering pizzas.

According to the lawsuits, the franchisees set a flat rate of reimbursement of $1 for most trips. The plaintiffs in both cases calculated the average number of deliveries per hour. They then figured out that the reimbursement rate per delivery and compared that rate to the IRS’ policy of 57.5 cents per mile. According to the plaintiffs’ math, they have been under-reimbursed mileage in the amount of $1.30 per delivery. They are then claiming that this under-reimbursement means they are effectively kicking back approximately $3.25 per hour to their employers. They alleged this kick back takes them under minimum wage.

These types of lawsuits have been springing up all over the country against pizza chains in the last few years. Although nothing in the federal Fair Labor Standards Act requires that employers reimburse expenses, plaintiffs in these cases are relying on an FLSA regulation, 29 CFR 531.35, which says that wage requirements will not be met if an employee is obligated to “kickback” monies to the employer that would take the employee below the minimum wage. The example given in the regulations is where an employee must provide the “tools of the trade” required to do his or her job and the cost of the tools cuts into the minimum wages.

It may seem easier for employers to pay a lump sum per delivery rather than force drivers to submit extensive records of miles driven or of actual expenses incurred. However, these cases should make an employer carefully evaluate the amount of the lump sum to insure that it is not resulting in an under payment of the minimum wage.

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