In a significant ruling on March 12, the 6th U.S. Circuit Court of Appeals decided in Parker v. Battle Creek Pizza, Inc. that if an employer mandates a minimum-wage employee to use their own vehicle for work, such as delivery driving, they must fully compensate the employee for the associated costs. This decision emerged from lawsuits filed by pizza delivery drivers in Michigan and Ohio, challenging how their employers reimbursed them for vehicle-related expenses including gas, maintenance, and depreciation.
The court found that both the federal district court in Michigan, which suggested reimbursement at the IRS mileage rate, and the Ohio court, which accepted the employers’ “reasonable approximation” of expenses, had not applied the correct standards. Consequently, the 6th Circuit vacated these decisions and called for reconsideration of the reimbursement approach.
The case underlines the broader implications of the pandemic’s boost to delivery services, stressing the need for businesses, especially in states like Michigan, Ohio, Kentucky, and Tennessee, to reevaluate their compensation practices for employees required to supply their own work tools, such as vehicles. The ruling highlights the Fair Labor Standards Act (FLSA) requirement that employees must receive the minimum wage, and if job essentials are provided by the employees, employers must ensure these costs do not diminish the workers’ earnings below minimum wage or overtime pay.
The court critiqued the use of a “reasonable approximation” for reimbursements, noting that such an approach could infringe upon the FLSA if it leads to underpayment of employees. The judgment also pointed out the inadequacy of using the IRS standard-mileage rate for reimbursement, as it may not accurately reflect the actual expenses incurred by drivers, varying significantly across different states and driving patterns.
Ultimately, the 6th Circuit suggested that employers bear the responsibility for ensuring that reimbursements fully cover the employees’ costs. The court proposed a burden-shifting framework for assessing the adequacy of reimbursements, akin to procedures in Title VII claims, where the initial proof of inadequate compensation could shift the onus to the employer to demonstrate that the reimbursements are fair and reflective of actual expenses.
