Can Pizza Delivery Drivers Get Mileage Compensation?

In the fast-paced world of food delivery, pizza delivery drivers play a crucial role. As they move around town delivering pizzas, many drivers use their own vehicles, raising an important question: Are pizza delivery drivers entitled to mileage compensation? 

This issue is not just a matter of employee satisfaction but also involves legal compliance under employment laws, such as those outlined by the Fair Labor Standards Act (FLSA).

For Human Resources (HR) professionals, understanding these reimbursement policies and legal obligations is essential for ensuring fair labor practices and avoiding potential legal pitfalls.

NOTE: To become a certified HR professional, you should consider obtaining SHRM CP certification. To achieve this, enrolling in a SHRM CP test prep program can be highly beneficial. This program provides access to essential study materials and practice questions, helping you prepare thoroughly for the certification exam. 

The Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) is a federal law that establishes minimum wage, overtime pay, recordkeeping, and child labor standards for employees in the United States. Key provisions of the FLSA include:

Reimbursement for Expenses

When employees incur expenses while performing their job duties, such as using their personal vehicles for deliveries, employers must ensure that these expenses do not effectively reduce the employee’s earnings below the minimum wage.

Minimum Wage

Employers must pay covered, nonexempt employees at least the federal minimum wage, which is currently $7.25 per hour.

As of 2023, 30 states and the District of Columbia have minimum wage rates higher than the federal minimum wage, ranging from $1.50 to $9.75 above the federal rate.

Overtime Pay

Covered, nonexempt employees must receive overtime pay at a rate of at least one-and-a-half times their regular rate of pay for all hours worked over 40 in a workweek.

State and local government employees may receive compensatory time off (comp time) instead of overtime pay, if certain conditions are met.

Recordkeeping

Employers must maintain accurate records of hours worked by covered, nonexempt employees.

Child Labor

The FLSA prohibits the employment of oppressive child labor and regulates the types of jobs and the number of hours children can work.

Exemptions

Certain employees are exempt from the minimum wage and overtime pay provisions of the FLSA, such as executive, administrative, professional, and outside sales employees.

The FLSA applies to most private and public sector employees, with some exceptions. Employers who violate the FLSA may be subject to civil and criminal penalties, as well as lawsuits by employees for back pay and damages.

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The 6th Circuit Decision

A significant ruling by the 6th U.S. Circuit Court of Appeals clarified that pizza delivery drivers must be reimbursed for vehicle expenses incurred while making deliveries. 

In the case involving Battle Creek Pizza and Team Pizza, the court rejected the argument that employers could simply provide a “reasonable approximation” of expenses. Instead, it emphasized that employers must reimburse drivers adequately to ensure compliance with the FLSA.

The plaintiffs in this case argued that the reimbursements they received were insufficient to cover their actual expenses, which included gas, maintenance, and insurance costs. 

The court found that the reimbursement rates offered by the employers fell short of the IRS standard mileage rate, which is a widely recognized benchmark for vehicle expenses.

This decision was based on the principle that employees should not bear the financial burden of expenses necessary for performing their job duties, which would otherwise reduce their effective wage below the legal minimum.

This 6th Circuit decision serves as a critical reminder for HR professionals about the importance of compliance with reimbursement policies under the FLSA. 

For those pursuing SHRM certifications, understanding this ruling is essential for ensuring fair labor practices, developing effective reimbursement policies, and managing employee relations.

Depending on the specific SHRM certification you are pursuing, you can access online practice questions, such as the Free SHRM SCP practice questions and Free SHRM CP Practice Questions.

Additionally, knowing the best way to prepare for the SHRM is essential for your success.

Implications for Employers

Compliance with Wage and Hour Laws

For HR professionals, the implications of this ruling are clear: employers must ensure that their compensation practices comply with wage and hour laws. 

This means that if mileage reimbursement is not provided, employers need to carefully assess whether the total compensation—after deducting expenses—meets or exceeds the minimum wage requirements. If not, adjustments or reimbursements may be necessary.

Policy Development

Employers should develop clear and comprehensive reimbursement policies to address mileage and other vehicle-related expenses. These policies should outline the types of expenses that are reimbursable, the process for submitting reimbursement requests, and the rates or formulas used to calculate reimbursement amounts.

By having a well-defined policy, employers can avoid misunderstandings and ensure consistent application of reimbursement practices.

Documentation and Record-Keeping

Accurate documentation and record-keeping are crucial. HR departments should maintain detailed records of mileage reimbursements, including logs of miles driven, receipts for expenses, and records of reimbursements made

 This documentation not only helps in compliance but also provides a clear audit trail in case of disputes or investigations.

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Key Considerations for Employers

State and Local Laws on Mileage Reimbursement

In addition to federal regulations, HR professionals must be aware of state and local laws that impact mileage reimbursement for employees. While federal law does not mandate mileage reimbursement, certain states have specific requirements that employers must follow. 

Mandatory Mileage Reimbursement States

As of 2024, only three states have laws that require employers to reimburse employees for using their personal vehicles for work-related purposes:

California:

California law mandates that employers compensate employees for all necessary expenditures incurred in the course of their duties, which includes mileage reimbursement for business-related travel. 

Employers are not required to pay a specific rate, but many choose to use the IRS standard mileage rate, which is set at $0.67 per mile for 2024.

Illinois:

Illinois law requires employers to reimburse employees for all necessary expenses incurred while performing their job duties. This includes mileage for business-related travel. 

Similar to California, while there is no mandated reimbursement rate, the IRS standard mileage rate is commonly used.

Massachusetts

Massachusetts law stipulates that employers must reimburse employees for transportation expenses incurred while traveling for work. The law recognizes the IRS standard mileage rate as an acceptable reimbursement amount, ensuring that employees are compensated fairly for their vehicle use.

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Impacts on Employee Satisfaction

Offering mileage reimbursement can significantly impact employee satisfaction and retention:

Fair Compensation

Employees, particularly delivery drivers, who feel that their expenses are fairly compensated are likely to be more motivated and committed to their jobs. This sense of fairness can lead to increased morale and productivity.

Reduced Turnover

When employees are satisfied with their reimbursement policies, they are less likely to seek employment elsewhere. This can reduce turnover rates and the associated costs of recruiting and training new employees.

Improved Service Quality

Satisfied employees are generally more engaged and provide better service. For pizza delivery drivers, this can translate into improved customer satisfaction and loyalty.

How To Claim Mileage for Pizza Delivery

Claiming mileage for pizza delivery can be a straightforward process, especially if you understand the necessary steps and documentation required. 

Determine Your Employment Status

Before claiming mileage, it’s essential to establish whether you are classified as an employee or an independent contractor:

• Employee: If you work for a pizza restaurant and receive a W-2, you may need to use Form 2106 (Employee Business Expenses) to claim your mileage as an itemized deduction on Schedule A of your tax return. However, this deduction is subject to certain limitations and may not be as beneficial due to the Tax Cuts and Jobs Act, which suspended many itemized deductions for employees until 2025.
• Independent Contractor: If you are self-employed or work for an on-demand food delivery service and receive a 1099-MISC, you can deduct your mileage directly on Schedule C (Profit or Loss from Business) when filing your taxes.

Choose Your Deduction Method

There are two primary methods for claiming mileage deductions:

• Standard Mileage Rate: This method allows you to deduct a fixed rate per mile driven for business purposes. For 2024, the IRS standard mileage rate is $0.63 per mile. To use this method, you simply multiply the total business miles driven by the standard rate.
• Actual Expense Method: Alternatively, you can deduct the actual expenses incurred while operating your vehicle for business purposes. This includes costs for gas, oil changes, repairs, insurance, registration fees, and depreciation. If you choose this method, you must keep detailed records of all expenses related to your vehicle.

Maintain a Compliant Mileage Log

To substantiate your mileage deduction, it’s crucial to keep a detailed and compliant mileage log. Your log should include:

• Beginning Vehicle Mileage: Record the odometer reading at the start of the tax year.
• Mileage for Each Trip: Document the total miles driven for business-related deliveries.
• Dates of Trips: Note the date of each delivery.
• Locations: Record where you drove for business purposes.
• Business Purpose: Clearly state the reason for each trip (e.g., delivering specific orders).

Use a Mileage Tracking App

To simplify the process of tracking your mileage, consider using a mileage tracking app like MileIQ or Everlance. These apps can automatically log your trips, categorize them as business or personal, and generate reports for tax time. 

This can save you time and ensure accuracy in your records.

Complete Your Tax Forms

• For Independent Contractors: If you are self-employed, report your mileage deduction on Schedule C. Enter the total mileage deduction on Line 9 (Expenses for business use of your vehicle).
• For Employees: If you are claiming mileage as an employee, complete Form 2106 and transfer the total to Schedule A as an itemized deduction. Keep in mind that this deduction may be limited based on your total itemized deductions.

Keep Documentation for Audits

The IRS requires that you maintain records for at least three years in case of an audit. This includes your mileage log, receipts for any related expenses (like gas and maintenance), and any other documentation that supports your claims.

In addition to mileage, pizza delivery drivers can claim other related expenses, such as:

• Parking Fees: Costs incurred while parking during deliveries.
• Tolls: Any toll fees paid while making deliveries.
• Phone Expenses: Costs related to your phone if used for business purposes, such as communicating with customers or dispatch.

Claiming mileage as a pizza delivery driver can significantly reduce your taxable income and increase your tax refund.

 By understanding your employment status, choosing the appropriate deduction method, maintaining a compliant mileage log, and keeping accurate records, you can ensure that you maximize your deductions while staying compliant with IRS regulations. 

Utilizing mileage tracking apps can further streamline this process, making tax time much easier.

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Wage Theft in Pizza Delivery

Wage theft refers to the practice of underpaying employees, either intentionally or due to ignorance of wage and hour laws. This can include failing to pay minimum wage, not reimbursing for business-related expenses, or misclassifying employees.

Common Forms of Wage Theft for Delivery Drivers:

Under-Reimbursement for Vehicle Expenses

Many pizza delivery drivers use their personal vehicles for work-related tasks. If employers fail to reimburse drivers adequately for gas, repairs, and wear-and-tear, it can lead to wage violations. The IRS suggests that vehicle-related costs can average over $0.65 per mile, and employers should reimburse drivers accordingly.

Minimum Wage Violations

If a delivery driver’s total compensation (including tips and reimbursements) falls below the federal or state minimum wage, this constitutes a violation. Employers are required to ensure that drivers earn at least the minimum wage after accounting for all expenses.

Dual Jobs and Tipped Wage Rates

Drivers may be paid the tipped wage rate (often lower than the minimum wage) for non-driving duties, such as cleaning or food preparation. Employers must pay the full minimum wage for these non-tipped tasks.

Working Off the Clock

Some employers may pressure employees to perform tasks before or after clocking in, which is illegal and constitutes wage theft.

Legal Recourse for Affected Drivers

Lawsuits and Legal Representation

Many law firms are actively pursuing claims against pizza companies for wage theft. Attorneys have successfully represented thousands of drivers, recovering millions of dollars in unpaid wages and reimbursements.

Recent cases, such as the proposed $20 million settlement for Papa John’s delivery drivers, underscore the prevalence of these issues in the industry. The lawsuit alleged that inadequate reimbursement policies pushed drivers’ wages below the minimum wage.

Employee Rights

Employees have the right to be compensated for all expenses incurred while performing their job duties. If drivers believe they are victims of wage theft, they should document their expenses, tips, and hours worked and seek legal advice.

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