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The Risk Of Deducting Expenses From Staff Wages: Minimum Wage Risks For Family Employers

A Wisconsin Pizza Hut franchisee agreed to pay two million dollars to settle a class action lawsuit in which the plaintiff drivers alleged the employer failed to pay them minimum wage.

The employer paid most of its delivery drivers $7.25 per hour, plus one dollar per delivery. However, according to the lawsuit, after drivers paid for gas and other costs of operating their own vehicles, they ended up earning less than minimum wage.

The employer alleges that drivers earned around $15 per hour with tips. It denies wrongdoing and stated that it only settled to avoid additional legal expenses. 

Nearly 2,500 current and former drivers were class members in the class action lawsuit. The driver who was the lead plaintiff will receive $25,000 in the settlement and six other drivers who provided key information will each receive $1,500. The remaining class of drivers will share $1,068,000, distributed based on their work location, hours, and distances driven.

Another $790,000 of the settlement will go to attorney fees and costs. Bruce Vielmetti "Delayed payday coming for Pizza Hut delivery drivers after $2 million lawsuit settlement" (Nov. 01, 2018).

Commentary and Checklist

Family employers who deduct staff pay for expenses or make staff pay their own work-related expenses must make certain that doing so does not violate federal (Fair Labor Standards Act - FLSA), state, or municipal minimum wage laws. When multiple levels of government regulate minimum wages in your jurisdiction, you must pay the amount that results in workers being paid the highest wage.

Here are some deductions from pay that could be risky for family employers: uniforms or uniform maintenance; rent; fuel; tools required to perform job duties; damages to the employer's property, even if it is caused by the staff member; financial losses from clients or customers not paying their bills; theft of property, even if it is stolen by the staff member; or employer-required medical exams.

Asking staff to reimburse you for costs of required items in cash, or making them pay for such items themselves, does not preclude family employers from the above requirements. You must still make sure that they receive at least minimum wage after any cash payments.

The best practice…don't deduct from wages; instead, reimburse all work-related expenses.

Of course, family employers must make sure that their other practices do not violate the FLSA. Go over the following with your local legal counsel to make sure you are in compliance:

  • Pay staff promptly after each pay period, making sure that delays in pay do not occur;
  • Fairly compensate staff for all time that they work, which may include meetings or other times they are required to be at work that are outside of their normal duties;
  • Pay staff overtime rates of one-and-a-half times their hourly pay for hours worked over 40 hours per week; and
  • Keep accurate and complete payroll records.
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