“Better Ingredients, Better Pay?” – Federal Court Provides Guidance on FLSA Compliance and Reimbursement of Expenses for Pizza Delivery Drivers

Executive Summary: On November 5, 2019, a federal district court in Ohio issued a decision clarifying the law governing whether owners of 73 Papa John’s franchised locations violated the Fair Labor Standards Act (FLSA) by failing to adequately reimburse their delivery drivers for expenses incurred in using their own vehicles to complete deliveries. In deferring to the Department of Labor (DOL) Field Operations Handbook, the court held that where employees are paid at or close to minimum wage and they use their own vehicles to make deliveries, the proper measure of minimum wage compliance for pizza delivery drivers is to either (1) track and pay delivery drivers’ actual expenses incurred or (2) pay the mileage reimbursement rate set by the Internal Revenue Service (IRS). See Hatmaker v. PJ Ohio, LLC, 2019 U.S. Dist. LEXIS 191790 (S.D. Ohio Nov. 5, 2019). Continue reading

DOL Attempts to End Confusion Regarding Bonuses and the Use of the Fluctuating Workweek

Background: The US Department of Labor’s Wage and Hour Division (DOL) is attempting to provide clarity and predictability to one of the most confusing areas of wage and hour law – the fluctuating workweek. The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees time and a half their regular rate of pay for hours worked over forty in each week. However, if certain conditions are met, the DOL allows employers to pay “a fixed salary for fluctuating hours” and overtime at a half-time rate. See 20 CFR 778.114. The general requirements for utilizing the fluctuating workweek method are: 1) an agreement with the employee to pay “a fixed amount” each week regardless of the hours worked, 2) that the employee’s hours fluctuate week to week, 3) that the fixed amount will be greater than the minimum wage for all hours worked in any given week and 4) the overtime rate is equal to half of “the amount of the salary” divided by the total hours worked in a week. The definition of the terms “fixed amount” and “amount of salary” within the regulation has led to disagreement among courts, and arguably the DOL itself, on whether any additional compensation would negate an employer’s ability to use this method of overtime computation. Where some courts have disallowed all bonuses and additional compensation, other courts attempt to resolve this by creating a dichotomy between “productivity based” (for example commissions) bonuses and “hours based” (for example night shift differential) bonuses, finding that only productivity bonuses are compatible with the fluctuating workweek method of compensation. However, there are bonuses (such as for retention, safety and referral) that do not fall neatly into either category. This confusion regarding additional compensation has dissuaded employers from utilizing this method of overtime compensation or not paying any supplemental compensation other than a fixed weekly amount. The DOL’s new proposed rule attempts to address this confusion. Continue reading