Waters v. Pizza to You, LLC

538 F.Supp.3d 785

Kirk WATERS, on behalf of himself and those similarly situated, Plaintiffs,

v.PIZZA TO YOU, LLC, et al., Defendants.

Case No. 3:19-cv-372

United States District Court, S.D. Ohio, Western Division, at Dayton.

Signed May 7, 2021

Andy Biller, Biller & Kimble, LLC, Columbus, OH, Nathan B. Spencer, Andrew P. Kimble, Biller & Kimble, LLC, Cincinnati, OH, for Plaintiffs.

Michael W. Sandner, Pickrel Schaeffer & Ebeling, Dayton, OH, for Defendants.

ENTRY AND ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT. ECF 37. THE PARTIES ARE ORDERED TO SUBMIT AN AMENDED RULE 26(F) REPORT BY MAY 21, 2021.

THOMAS M. ROSE, UNITED STATES DISTRICT JUDGE

Pending before the Court is Plaintiffs’ Motion for Partial Summary Judgment. ECF 37. The motion asks the Court to define the law that will govern the determination of whether Defendants are liable on Plaintiffs’ federal and state minimum wage claims.

I. Background

This case challenges Defendants’ alleged practice of under-reimbursing pizza delivery drivers for their vehicle-related expenses. Plaintiff and his fellow delivery drivers provided vehicles for Defendants’ benefit, using their own cars to deliver pizzas. See ECF 37-2, Transcript from the Rule 30(b)(6) Deposition of Entity Defendants at 54:25–55:2. During most of the relevant time period, Defendants reimbursed the drivers $1.00 per delivery. Dep. at 50:17–24. In 2019, Defendants raised the reimbursement to $1.25 per delivery. Id. at 54:3–14. The delivery radius averaged three miles. Id. at 53:14–22. Thus, drivers were reimbursed an average of less than the IRS mileage rate applicable during the relevant time period of $0.54. Defendants did not reimburse Plaintiff's actual vehicle expenses. Id. at 59:2–19; Def. Interrogatory Answer 5. Instead, Defendants picked $1.00/delivery as a reimbursement rate because other pizza companies used that rate. Dep. at 55:15–56:7.

II. Standard

The standard of review applicable to motions for summary judgment is established by Federal Rule of Civil Procedure 56 and associated case law. Rule 56 provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Alternatively, summary judgment is denied "[i]f there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Hancock v. Dodson , 958 F.2d 1367, 1374 (6th Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Thus, summary judgment must be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. Analysis

The FLSA mandates that " ‘[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce’ a statutory minimum hourly wage.... The Department regulations require that the minimum wage be paid ‘finally and unconditionally’ or ‘free and clear.’ " Stein v. hhgregg, Inc. , 873 F.3d 523, 530 (6th Cir. 2017) (citing 29 U.S.C. § 206(a) and 29 C.F.R. § 531.35 ).

The "anti-kickback" regulation implementing the FLSA states:

Whether in cash or in facilities, "wages" cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or "free and clear." The wage requirements of the Act will not be met where the employee "kicks back" directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee. This is true whether the "kickback" is made in cash or in other than cash. For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer's particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act. See also in this connection, § 531.32(c).

29 CFR § 531.35.

The anti-kickback regulation," prohibits any arrangement that " ‘tend[s] to shift part of the employer's business expense to the employees ... to the extent that it reduce[s] an employee's wage below the statutory minimum.’ " Mayhue's Super Liquor Stores, Inc. v. Hodgson , 464 F.2d 1196, 1199 (5th Cir. 1972). "The wage requirements of the Act will not be met where the employee ‘kicks back’ directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee." 464 F.2d at 1199 (quoting 29 C.F.R. § 531.35) ; see also Ramos-Barrientos v. Bland , 661 F.3d 587, 594-95 (11th Cir. 2011) (quoting Mayhue's ); Rivera v. Peri & Sons Farms, Inc. , 735 F.3d 892, 898 (9th Cir. 2013) (requiring the employer to reimburse for travel and immigration expenses incurred before the employment relationship began because these expenses were "essential for the ... employment relationship to come to fruition."); also Martin v. Petroleum Sales, Inc. , No. 90-cv-2453-4A, 1992 WL 439740, *15 (W.D. Tenn. Jul. 9, 1992) ("Wage payments must be made ‘free and clear’ and without ‘kickbacks’ to the employer or to another person for the employer's benefit. 29 C.F.R. § 531.35. Such an attempt to shift part of the employer's cost of doing business [cash shortages] to the employee is illegal.") (citing Mayhue's , 464 F.2d at 1199 ).

In the pizza delivery context, the cost associated with delivering food for an employer is a "kickback" to the employer unless it is fully reimbursed, lest a minimum wage violation be triggered. See, e.g., Perrin v. Papa John's Int'l, Inc. , 114 F. Supp. 3d 707 (E.D. Mo. 2015) ; Graham v. The Word Enters. Perry, LLC , No. 18-cv-0167, 2018 WL 3036313, *4 (E.D. Mich. Jun. 19, 2018) ("An example of such an expense are tools of the trade that the employee must provide which is required to perform the job, such as a personal car that an employee operates to make pizza deliveries."); Ke v. Saigon Grill, Inc. , 595 F.Supp.2d 240, 258 (S.D.N.Y. 2008) (holding that deliverymen's bicycles and motorbikes were "tools of the trade," such that costs related to those vehicles had to be reimbursed by the employer where deliverymen otherwise earned minimum wage).

As a general principle, employers are not permitted to "guess" or "approximate" a minimum wage employee's expenses for purposes of reimbursing the expenses. This would result in some employees receiving less than minimum wage, contrary to the FLSA mandate. Instead, as a general proposition, the FLSA requires employers to pay back the actual expenses incurred by the employees. In the pizza delivery driver context, however, determining and maintaining records of each employee's actual expenses is a cumbersome task for the employer. The Department of Labor addressed this in its Field Operations Handbook, by giving employers a choice in order to ease their burden: either (1) keep records of delivery drivers’ actual expenses and reimburse for them or (2) reimburse drivers at the IRS standard business mileage rate:

30c15 Car expenses: employee's use of personal car on employer's business.

In some cases it is necessary to determine the costs involved when employees use their cars on their employer's business in order to determine minimum wage compliance. For example, car expenses are frequently an issue for delivery drivers employed by pizza or other carry-out type restaurants.

(a) As an enforcement policy, the IRS standard business mileage rate found in IRS Publication 917, "Business Use of a Car" may be used (in lieu of actual costs and associated recordkeeping) to determine or evaluate the employer's wage payment practices for FLSA purposes. The IRS standard business mileage rate (currently 28 cents per mile) represents depreciation, maintenance and repairs, gasoline (including taxes), oil, insurance, and vehicle registration fees. In situations where the IRS rate changes during the investigation period, the applicable rates should be applied on a pro-rata basis.

See DOL Field Operations Handbook§ 30c15(a)(2000).

The Court notes that the Field Operations Handbook is not a regulation, but an "interpretation[ ] of Department regulations" that was "not subject to the rigors of the Administrative Procedur[e] Act, including public notice and comment"; the Field Operations Handbook is therefore "not controlling or entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)." Stein v. hhgregg, Inc. , 873 F.3d 523, 532 (6th Cir. 2017) (internal quotation marks, parallel & pinpoint citations omitted). The Field Operation Handbook is, however, one of the "interpretations, opinions and explanatory guidelines" of the Department of Labor, to which a court "may properly resort for guidance" under Skidmore v. Swift & Co. , 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944). Stein , 873 F.3d at 532. The weight to be given such matter in a particular case "will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade." Id. (quoting Skidmore , 323 U.S. at 140, 65 S.Ct. 161 ).

The process for determining whether to give deference to the Department of Labor Field Operations Handbook is two-fold. First, the Court should determine if the regulation is...