Three wage and hour lawsuits were filed recently by food delivery drivers as class and collective actions against three Colorado-based Domino’s Pizza franchise groups. The lawsuits, which were “delivered” to federal court on April 20th and 21st, seek unpaid minimum wages and overtime based on an allegedly improper expense reimbursement formula for wear and tear on the drivers’ personal vehicles. The lawsuits seek damages under both the federal Fair Labor Standards Act (FLSA) and Colorado State wage and hour law.
The drivers claim that the formula, which is pegged to the number of deliveries completed and not miles driven, does not account for the lower gas mileage and higher repair costs associated with the frequent starting and stopping of delivery vehicles. According to the drivers, when these factors are taken into account, their expense reimbursement rate was only twenty (20) to twenty-three (23) cents per mile—over thirty (30) cents less than the IRS’ recommended fifty-three and one-half (53.5) to fifty-seven and one-half (57.5) cent standard mileage reimbursement rates during the relevant time period. This is reportedly a food service delivery industry-wide issue. Domino’s franchisees operating restaurants in Oklahoma, Wyoming, and elsewhere in Colorado have faced similar lawsuits. Major players in the food service delivery “gig economy,” like GrubHub, have also faced class and collective wage and hour lawsuits—with the added twist that drivers were allegedly misclassified as independent contractors instead of employees.
Although the franchise groups’ principal owners are named as defendants, the franchisor (Domino’s Pizza Inc.) is notably absent from the lawsuits. Domino’s Pizza franchisees sign agreements holding themselves personally responsible for all employment practices at their restaurants, from hiring to firing to compensation, as independent business owners. As previously covered by HR Legalist, attempts to contractually shift liability do not always insulate corporate from legal exposure in franchise relationships—particularly under the “joint employer” theory of legal liability.
While the National Labor Relations Board (NLRB) abolished the broad and employee-friendly Browning-Ferris joint employment standard in December of 2017, the NLRB reversed course just two (2) months later in February of this year, squarely placing franchisors, like Domino’s Pizza, back in the crosshairs of aggrieved employees. Even though NLRB rulings are not directly binding on federal courts, they are frequently deferred to and applied by judges. Since franchisors may not be protected from future lawsuits, they should take additional steps to ensure that franchisees appropriately compensate delivery drivers for wear and tear on their vehicles. A mandatory mileage reimbursement rate set by corporate, alongside provisions requiring franchisees’ compliance with federal, state, and local wage and hour laws, could go a long way.
Stay tuned to HR Legalist for further updates regarding this and other wage and hour issues. In the meantime, employers with questions about the impact of these lawsuits should contact counsel with experience in matters of employment law.
The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.
Alexander V. Batoff focuses his practice on counseling clients on federal and state employment laws and regulations and defending them in litigation. He may be reached at 215-665-3048