A franchisee that owned more than 300 Pizza Hut locations nationwide, and James Bodenstedt, former operator of the business, have agreed to pay $4,750,000 to resolve delivery drivers’ class-action lawsuit alleging the franchisee and its former operator violated the Fair Labor Standards Act.
A delivery driver at a Georgia location filed the lawsuit in April 2023, alleging MUY Pizza-Tejas, LLC, did not reimburse delivery drivers for their actual automobile-related expenses or using the IRS standard business mileage rate but rather used a per-delivery reimbursement rate that fell below the IRS’ rate (Brown v. MUY Pizza-Tejas, LLC, et. al.).
The drivers, who were paid “minimum wage, slightly above minimum wage, or minimum wage minus a tip credit,” alleged they were actually deprived of the minimum wage guaranteed by the Fair Labor Standards Act due to the required purchase of gas, vehicle parts and repair, car insurance, cellphone plans and other out-of-pocket expenses, according to the complaint.
The worker filed the lawsuit on the heels of a similar complaint against the company, Stotesbery v. MUY Pizza-Tejas, LLC, et. al., filed in June 2022 by a Minnesota driver; a court in that case limited the scope to Minnesota drivers.
The Georgia class-action lawsuit, on the other hand, includes drivers nationwide and currently represents more than 1,000 drivers from Florida, Georgia, New Mexico, North Carolina, South Carolina, Texas, Virginia and Wisconsin.
The settlement agreement, filed Oct. 18, seeks to resolve both the Stotesbery and Brown lawsuits. Drivers who worked for the franchisee at 321 locations in the states above between June 21, 2019, and Sept. 27, 2021, and who have already opted in — or opt in within a two-month period after the agreement is finalized — will receive a final payment from the $4.75-million fund, meant to cover reimbursements, unpaid wages, liquidated damages and other fees.
The class could potentially include thousands more drivers if they elect to opt in to the settlement, according to court documents.
The defendants did not admit liability as part of the settlement.
Courts tussle over proper reimbursement for delivery drivers
The MUY Pizza-Tejas lawsuit is the latest action in a long-running legal battle. Because delivery drivers are often required to use their own vehicles, workers have at various times alleged violations of the Fair Labor Standards Act.
Courts have split on how to address such questions, however.
In March, in a joint opinion, the 6th U.S. Circuit Court of Appeals vacated two district court decisions — one in Michigan and one in Ohio. In the Michigan case, the court agreed with drivers they should be reimbursed using the IRS rate, while in the Ohio case, the court sided with the employer, finding a “reasonable approximation” of drivers’ costs would be sufficient.
The appeals court disagreed with both, finding that the IRS standard rate was imperfect — tending to overpay in states with low gas taxes and underpay in states with high gas taxes — while the “reasonable approximation” method could also result in underpaying minimum wage employees, which would violate the FLSA.
“If an employer requires a minimum wage employee to provide his own ‘tools’ for work, the employer must reimburse him for 100% of the cost of doing so,” the 6th Circuit found, sending both cases back to the lower courts for reconsideration.
