Dive Brief:

• Papa John's store operators in several states agreed to pay $3.25 million to settle state and federal wage and hour claims brought by a class of delivery drivers, per the order of a judge in the U.S. District Court for the Southern District of Ohio (Hatmaker v. Papa John's Ohio, et. al, No. 3:17-cv-00146 (S.D. Ohio June 4, 2021)).
• The settlement stems from a 2017 suit in which three drivers sued, disputing that the reimbursement provided by their employers "adequately reimbursed [p]laintiffs and other drivers for their vehicle expenses," according to the motion for preliminary settlement approval filed May 27. The suit includes thousands of drivers across approximately 70 stores in three states.
• According to the May 27 document, the settlement would be broken into two payments, with the first to occur within 40 days of the court's final settlement approval and the second on or before April 1, 2022. Each class member would receive a prorated share of the settlement based on "an anticipated hybrid formula," which would in turn be based on the number of weeks worked, miles driven or both.

Dive Insight:

It is not the first time a class of delivery drivers has filed suit over wage and hour claims related to reimbursements.

In 2019, a group of Domino's franchises in Illinois paid $807,500 to settle claims that the restaurants' operator failed to reimburse workers' costs for driving their cars for work, failed to properly claim a tip credit for their wages and paid the workers a tipped wage while they worked in a non-tipped capacity, among other claims.

The Fair Labor Standards Act specifies that the cost of certain "other facilities," such as "tools of the trade which will be used in or are specifically required for the performance of the employer's particular work," may not be counted as wages.

Last year, the U.S. Department of Labor published an opinion letter stating that such tools include the required use of a personal vehicle. The same letter said employers may reimburse delivery drivers who use their personal vehicles to complete deliveries with a "reasonable approximation of expenses incurred for the employer's benefit," rather than "the actual amount of expenses incurred."

This "reasonable approximation" standard was also asserted by the defendants in Hatmaker, according to the May 27 document, who "contended then, and still contend now … that they are permitted to 'reasonably approximate' the employee's expenses and reimburse that amount."

However, on May 7, the district court "declined to refer" to the DOL opinion letter and "affirmed the legal standard adopted in this lawsuit." The court instead held that the proper method for reimbursing delivery drivers would be to either track and reimburse the drivers' actual expenses or reimburse the drivers at the IRS business mileage rate, according to the May 27 document.