Transportation Executive Summary: Truck Driver Wage Rate Dispute Ruled Upon by Court of Appeals
The United States Court of Appeals for the Eighth Circuit recently upheld a district’s court grant of summary judgment and dismissal of various claims under federal and state wage and hour laws, finding that non-taxable, mileage based payments to drivers in positions that required them to spend nights away from home on a regular basis functioned as a wage and were properly included in the minimum wage “regular rate” calculation under the FLSA. Baouch v. Werner Enterprises, Inc., 908 F.3d 1107, 1118 (8th Cir. 2018).
Under 29 U.S.C. § 206, employers engaged in commerce are required to pay a statutorily mandated minimum wage. “An employer violates the FLSA’s minimum wage requirement when an employee’s ‘regular rate’ drops below the minimum wage.” 29 U.S.C. § 207 defines the regular rate, and requires employers to include in their calculation of the regular rate, “all renumeration for employment paid to, or on behalf of, the employee.” Section 207 goes on, however, to specifically exclude some renumeration to employees from the regular rate, notably excluding reimbursements from the regular rate, including “reasonable payments for traveling expenses . . . incurred by an employee in furtherance of his employer’s interests.”
In 2003, Werner Enterprises, Inc. implemented a “Payment Plan,” which offered non-taxable, mileage based payments to drivers employed in positions that required them to travel and spend nights away from home on a regular basis. The primary effect of the Payment Plan was to give participating drivers more take-home pay in their weekly paychecks. The Payment Plan was offered to both student and experienced drivers, 52,000 of whom made up the class instituting the case in district court, alleging that Werner’s inclusion of these Payments in its “regular rate” violated various federal and state wage and hour laws. The main issue on appeal concerned how the per diem payments to Werner’s drivers fit within the FLSA’s “regular rate.”
The class first argued that Werner was judicially estopped from claiming the Payments were wages because of certain representations Werner made to the IRS in order to qualify as an “accountable plan.” To qualify, Werner represented that the Payments at issue were reimbursements for travel expenses that drivers reasonably expected to incur during their time away from home. The class also argued the payments clearly fell within 29 U.S.C. § 207(e)(2), which specifically excludes payments for traveling expenses from the FLSA’s regular rate. When these payments were excluded from the regular rate, Werner’s drivers were earning less than the required minimum wage, in violation of 29 U.S.C. § 206. The district court held the Payments were properly included in the regular rate, noting the Payments “at all times reflected hours worked” and therefore functioned as a wage rather than a true per diem expense reimbursement.
The Eighth Circuit addressed the judicial estoppel claim before reaching the issue of minimum wage. Although Werner did not dispute its representations to the IRS, the court held that, as a matter of law, judicial estoppel did not apply to this case because the representations to the IRS “were not clearly inconsistent” with the representations Warner made during the course of litigation. As the “IRS regulations governing accountable plans are not identical to the DOL regulations,” representations made in order to qualify for the accountable plan under the IRS, did not direct a finding that the payments were reimbursements under DOL regulations.
The court went on to determine the character of the Payments under the FLSA. In determining the Payments were properly included by Werner in their regular rate, the district court evaluated whether the payments were reimbursements for expenses solely for Werner’s benefit or convenience, and whether the Payments approximated actual expenses. Taking this into consideration, the Eighth Circuit made note of the fact that the Payments made to drivers were based on hours worked, or miles driven. As Werner tied the Payments to work performed, the court noted the case was distinguishable from those where employers did not tie per diem payments to the amount of hours that employees worked. Although this was a key determinant, the court also noted several other facts leading them to characterize the Payments as wages, including “(1) the form and purpose of the payments were intended to act as remuneration for work performed; (2) the payments were unrestricted in that the employees could spend the Payments in any manner and were not required to report expenses or provide receipts; and (3) Werner introduced the Payments as a means to attract new employees by maximizing their take home pay.” For these reasons, the Eighth Circuit affirmed the district court’s holding that the Payments were wages and were properly included in Werner’s regular rate. Consequently, the FLSA claims were without merit and were properly dismissed.
Contact John F. Fatino for more information about this or other transportation matters at 515-288-6041. Anna E. Mallen, J.D. candidate, assisted in the drafting of this article.