In a ruling held on 12 March, the 6th US Circuit Court of Appeals has sided with minimum-wage delivery drivers, asserting that they must be fully reimbursed for using their own vehicles for work-related tasks.
The court’s decision came after drivers from a Michigan restaurant and a Domino’s franchise in Ohio filed lawsuits, claiming that their employers had failed to adequately reimburse them for expenses incurred while using personal vehicles for work, including gas, maintenance, mileage and depreciation.
While federal district courts in Michigan and Ohio had adopted different standards for reimbursement – favouring either the IRS mileage rate or a ‘reasonable approximation’ of expenses – the 6th Circuit deemed both approaches inadequate. The court emphasised that under the Fair Labour Standards Act, if an employer requires a minimum-wage employee ‘to provide their own tools for work’, they must ‘reimburse the employee for 100% of the cost incurred’.
The ruling highlights the challenges faced by businesses in accurately calculating and reimbursing work-related expenses for employees, particularly in industries heavily reliant on delivery services. While the decision directly impacts businesses in Michigan, Ohio, Kentucky and Tennessee – the states under the jurisdiction of the 6th Circuit – it sends a clear message to employers nationwide to ensure compliance with reimbursement standards.
Moreover, the court’s rejection of both the IRS mileage rate and the ‘reasonable approximation’ standard underscores the need for a more nuanced approach to determining reimbursement rates. The court suggested a burden-shifting regime, where employees could present evidence of inadequate reimbursement, and employers would bear the burden of demonstrating a relationship between the reimbursement and actual costs.
With wage and hour litigation on the rise, businesses must stay vigilant and ensure that their compensation practices align with legal requirements. As the cases are remanded to lower courts for further consideration, the implications of this decision are likely to resonate across industries reliant on delivery services.
