1
Employment Newsletter
August 2011
Stephen P.
Brown
Partner
Stephen P. Brown is a Partner in
the Connecticut office. His practice
includes the representation of employers
in unfair employment practices cases
ranging from age, sex, disability and
racial discrimination. Stephen has
litigated cases throughout Connecticut
in the state and federal court systems,
as well as state and federal agencies.
His practice in the employment
practices liability field also includes
the defense of corporations, business
owners and individuals, as well as
their insurers, for claims involving
discrimination, sexual harassment,
wrongful termination, and workplace
torts. Stephen’s practice also includes
drafting and enforcement of restrictive
covenants in employment agreements.
He has appeared before the Equal
Employment Opportunity Commission
(EEOC) and the Commission on Human
Rights and Opportunities (CHRO)
agencies, and has litigated in both
federal and state courts. He is also
a member of various professional
organizations, including PLUS.
Seamus Michael Keating is a
Summer Law Clerk, working in the
firm’s Stamford and Albany Offices as
a Law Clerk and Government Affairs
Clerk. He recieved his undergraduate
degree from the University of
Connecticut, and is currently a thirdyear law student at Albany Law School.
For more information:
Please contact our national chair or
one of our regional leaders:
National Practice Chair:
Ricki Roer, New York
ricki.roer@wilsonelser.com
212.915.5375
Regional Contacts:
Western Region, Marty Deniston
martin.deniston@wilsonelser.com
Southwestern Region, Linda Wills
linda.wills@wilsonelser.com
Central Region, David Holmes
davId.holmes@wilsonelser.com
DC Region, Robert Wallace
robert.wallace@wilsonelser.com
Southeast Region, Sherril Colombo
sherril.colombo@wilsonelser.com
The Fair Labor Standards Act,
Independent Contractors and
Pizza Delivery
Understanding the definitions of “employee” and “independent
contractor” and allocating proper compensation under the FLSA.
Recently, there has been an increase in the number of individuals in the workforce classified as
independent contractors,1 as well as lawsuits against employers claiming a misclassification of
employees as independent contractors.2 One group of workers, delivery drivers, has begun asserting
its rights and bringing claims under state and federal laws. It is unclear whether this is due to a rise in
gas prices,3 a decline in tips from the recession or workers simply becoming aware of their rights. The
increase in litigation provides a warning to those who employ delivery drivers: make sure your drivers
are being properly compensated under the law.
Take, for example, the following scenario: It is Friday night and you want pizza. You call the local
pizza place and ask for a medium pepperoni, delivered. When the driver arrives, you realize that
you only have enough cash for a $1 tip. The restaurant has no delivery charge. You apologize to the
driver and promise to tip him more next time. He nods begrudgingly, gets in his car and makes the
five-mile trek back to the restaurant. Whether you, the driver or the restaurant owner realize it, there
may have been a violation of federal and state labor laws.
See, Micah Prieb Stoltzfus Jost, Note, Independent Contractors, Employees, and Entrepreneurialism Under
the National Labor Relations Act: A Worker-by-Worker Approach, 68 Wash & Lee L. Rev. 311, 314 (Winter
2011) (citing Stephen F. Befort, Presentation, The Regulatory Void of Contingent Work, 10 EMP. RTS. &
EMP. POL’Y J. 245, 247-48 (2006)); Sarah Johnson, Cracking Down on Independent Contractors, CFO,
(March 3, 2010) http://www.cfo.com/article.cfm/14480567/c_14480391?f=home_todayinfinance)).
2 See, Robert W. Wood, Independent Contractor vs. Employee and Blackwater, 70 Mont. L. Rev. 95, 117
(Winter 2009) (citing Tracey A. Cullen, “The Independent Contractor Snarl,” Newsltr. of N.Y. Empl. Law Ltr.
(June 6, 2008)) (available at http://www.hrhero.com/hl/060608-lead-independent.html)).
3 Department of Labor, Bureau of Labor Statistics, Databases, Tables & Calculators by Subject, Consumer
Price Index- Average Price Data, Gasoline, Unleaded Regular, per gallon, 2001–2011. http://data.bls.gov/cgibin/surveymost. Retrieved August 9, 2011.
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Employment Newsletter
August 2011
Congress enacted the Fair Labor Standards Act (FLSA) in 1938 to ensure “a fair day’s pay for a fair
day’s work.”4 It covers various topics from minimum wage5 to overtime6. Whenever the minimum
wage is increased, Congress is amending the FLSA7. All employees, but not independent contractors
and volunteers, are covered by the FLSA.8
WILSON ELSER
EMPLOYMENT PRACTICE
Employers face a growing set of
legal challenges. There are new and
often complex statutory regulations,
increased potential exposure from
the ever-expanding challenges of
employment decisions, and increased
oversight by the U.S. Department
of Labor, to name just a few. Wilson
Elser helps companies meet these
challenges, and more, with a
broad range of capabilities in
employment law.
Creating harmonious and productive
work environments is not easy. Our
clients count on us for guidance
in formulating and implementing
employment policies and decisions,
and to defend those decisions if
they are challenged. We assist our
clients in all employment-related
matters, including transactional and
contract matters, restrictive covenants
and noncompete disputes, labor
force reductions, and matters and
grievances under collective bargaining
agreements. We litigate claims of
discrimination, defamation, wrongful
termination and negligent hiring. Our
attorneys are also well-versed in labor
law issues.
Wilson Elser handles cases for both
private and public-sector employers.
Our attorneys are skilled in all aspects
of federal and state discrimination
employment laws, including issues
arising under Title VII, the Age
Discrimination in Employment Act, the
Americans with Disabilities Act, Family
and Medical Leave Act and Employee
Retirement Income Security Act. We
are fully prepared to defend our clients
before all administrative and judicial
tribunals, including the U.S. Equal
Employment Opportunity Commission,
the National Labor Relations Board,
all state administrative agencies, the
U.S. Department of Labor, as well as
all state and federal courts.
Recently, the Connecticut District Court analyzed whether a delivery driver was an employee or
an independent contractor.9 In that case, Campos v. Zopounidis, the driver was suing his employer
seeking unpaid overtime wages under the FLSA.10 His employer, the owner of the pizza restaurant,
claimed that he was an independent contractor and was not due protections under the FLSA.11 The
employer’s argument was that the driver performed only delivery duties and used his own car.12 The
court rejected the owner’s argument and granted partial summary judgment on that issue in favor of
the plaintiff being an employee.13
In determining the status of the driver as an employee or an independent contractor, the court applied
the Second Circuit’s economic realities test. The test focuses on the following five factors:
• The degree of control exercised by the employer over the workers
• The workers’ opportunity for profit or loss and their investment in the business
• The degree of skill and independent initiative required to perform the work
• The permanence and duration of the working relationship
• The extent to which the work is an integral part of the employer’s business.14
The Campos court, in its analysis, found several facts that weighed in favor of the driver being an
employee. Specifically, the court determined that (1) the owner of the pizza restaurant set the driver’s
schedule and assigned his driving routes, (2) the driver had no discretion in his duties nor did he
do any other delivery work for other companies, (3) the driver did not have an investment in the
enterprise other than his own motor vehicle, and (4) no special skills were required to perform his
job.15 This meant that the driver was an employee and could avail himself of the FLSA’s protections.
In Iames v. Murphy, an Ohio Appellate Court, deciding on liability in a personal injury case, found that
the driver was an employee and not an independent contractor under the law.16 The court stated that
the driver was akin to a “waiter on wheels.”17 The fact that he used his own car and paid for his own
gas was no more persuasive to the court than a waiter using his own shoes and paying for his
own food.18
The previous cases establish that most delivery drivers would be employees due protections under
the FLSA. But even if the drivers are paid less than minimum wage, they make tips. So long as tips
and fees that drivers received from deliveries take them over the minimum wage threshold, and their
base wage is at least $2.13 per hour, there is no violation of the FLSA.19 While this is true, there are
still potential mistakes that employers can make that would give rise to a violation of the law.
Scott v. City of New York, 592 F.Supp.2d 386, 399 (S.D.N.Y. 2008); “Fair Labor Standards” 29 U.S.C.
§§ 201-219.
5 29 U.S.C. § 206.
6 29 U.S.C. § 207.
7 See U.S. Troop Readiness, Veterans’ Care, Katrina Recover, and Iraq Accountability Appropriations Act, PL
110–28, 2007 HR 2206. (Most recent amendment of Federal Minimum Wage, amending 29 U.S.C. §206).
8 29 U.S.C. § 214.
9 Campos v. Evdoxia Zopounidis, No. 3:09-cv-1138, 2011 U.S. Dist. LEXIS 78905 (D. Conn. June 20, 2011).
10 Id. at *1.
11 Id. at *9.
12 Id. at *4,*11.
13 Id. at *24-25.
14 Campos, 2011 U.S. Dist. LEXIS 78905 at *10 (citing Brock v. Superior Care, Inc., 840 F.2d 1054, 1058-9
(Second Cir. 1988)).
15 Id. at *11-24.
16 Iames v. Murphy, 106 Ohio App. 3d 627, 634 (First App. Dist. 1995).
17 Id.
18 Id.
1929 U.S.C. § 203.
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Employment Newsletter
August 2011
One of those pitfalls is failing to take into account a driver’s costs in executing his job. This includes
gas, wear and tear, and insurance. Department of Labor regulations state: “[I]f it is a requirement
of the employer that the employee must provide tools of the trade which will be used in or are
specifically required for the performance of the employer’s particular work, there would be a violation
of the Act in any workweek when the cost of such tools purchased by the employee cuts into the
minimum or overtime wages required to be paid him under the Act.”20 Motor vehicles have been held
to be tools of the trade in the context of delivery.21 This means that even if a driver makes minimum
wage, his expenses in the maintenance of his car could make his net earnings fall below minimum
wage. This would give rise to a minimum wage violation under 29 USC § 206 of the FLSA.
Additionally, employers must properly credit employees’ tips toward the minimum wage and inform
delivery drivers of this under 29 U.S.C. § 203(m). If an employer chooses to pay less than minimum
wage based on an expectation that the employee will receive tips, the employer must properly take
account of those tips and ensure that the wage is higher than the $7.25 minimum22; the employer
must also inform the drivers of this. The Southern District of New York found inadequate notice of
the tip credit under § 203(m) due to foreign drivers not being able to read the English notice.23 If no
notice is provided to the employees regarding the tip credit, then the employer cannot claim the credit
to take the driver’s wage above the statutory minimum.24 So, even if an employer pays more than
minimum wage, the employer could still violate the FLSA. If the employer fails to properly claim or
inform the driver about the tip credit, the employer may be unable to claim the driver’s tips as part of
the wage. The driver’s costs could then bring his wage below the federal minimum.
In a Southern District of New York case, Ke v. Saigon Grill, the court found in favor of delivery drivers
on all FLSA violation claims except their retaliation claim, which required further proceedings.25 In
that case, numerous drivers brought federal and state claims for unpaid overtime and minimum wage
violations, lack of reimbursement for their bikes and motorbikes, unlawful deductions of fines by
the employer and retaliation for attempting to assert their rights.26 The employer in Ke engaged in a
number of questionable practices. For example, drivers were required to meet a certain quota of inrestaurant duties. If they failed to complete them, they would be required to pay the restaurant money
to compensate them for having to pay the kitchen workers to do their work.27 Drivers were required
to pay fines to the employer for work-related infractions.28 Perhaps most glaring was the practice of
making out checks to drivers, requiring them to cash the checks and return the cash to the restaurant
owners. The court speculated that this was done by the employer to try to make it appear that they
were paying their drivers more than they actually were.29
In Lin v. Benihana National Corporation, drivers brought a putative class action against their employer
for many of the same violations present in Ke. Initially, class certification was denied.30 After the
drivers amended their complaint, however, the court permitted them to bring a collective action for tipcredit violations and off-the-clock work.31
These cases demonstrate the cost that litigation can impose on a small business. For example,
the Saigon Grill restaurant at one point eliminated delivery service.32 On several user review sites,
there is still talk about the labor disputes, with some customers boycotting the restaurant and others
29 CFR § 531.35.
Ke v. Saigon Grill, Inc., 595 F. Supp. 2d 240, 258 (S.D.N.Y. 2008).
29 U.S.C. § 206.
Lin v. Benihana Nat’l Corp., No. 10 Civ. 1335, 2011 U.S. Dist. LEXIS 58587, at *19-20 (S.D.N.Y. April 20,
2011) (citing Chan v. Sung Yue Tung Corp., No. 03 Civ. 6048, 2007 U.S. Dist. LEXIS 7770 (S.D.N.Y. 2007)).
24 Ke, 595 F. Supp. 2d at 254.
25 Id. at 282.
26 Id. at 245.
27 Id. at 253.
28 Id. at 256.
29 Id. at 251.
30 Lin v. Benihana Nat’l Corp., 755 F. Supp. 2d 504 (S.D.N.Y. 2010).
31 Lin, 2011 U.S. Dist. LEXIS 58587 (S.D.N.Y. 2011).
32 Ke, 595 F.Supp.2d at 254.
20
21
22
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Employment Newsletter
August 2011
bemoaning lowered quality and higher prices.33 There is even a boycottsaigongrill.com website
organizing protests.34 While the business is still operating, the attention that it has received from this
case is not the type of attention a restaurant normally desires.
This issue is not limited to small and medium-sized businesses. Domino’s®, Pizza Hut® and other
large chains have been sued, along with their respective franchisees.
The United States District Court for the District of Colorado certified a class of delivery drivers
against a major franchisee of Papa John’s pizza for violations of the FLSA, including minimum wage
violations due to costs in performing their jobs.35 Included in their costs were the use of their vehicles,
their uniforms and cell phones.36 The Colorado district court is also hearing class action cases
brought by delivery drivers against Pizza Hut franchisees37 and Pizza Hut, Inc.38 for violating the
FLSA. The United States District Court for the District of Kansas recently certified a class of Domino’s
pizza delivery drivers for their FLSA claim against a franchisee.39
In 2008, the United States District Court for the Eastern District of New York certified a collective
action for drivers who worked in the Coney Island Domino’s for FLSA violations, but did not grant
certification to those employees in another Brooklyn store due to a lack of evidence.40 A New Jersey
court dismissed a case against Domino’s IP Holder LLC in a case for FLSA violations brought against
it, but not the claim against the Domino’s franchisees. 41 The court found that there was an insufficient
relationship, under the Third Circuit’s economic realities test, for Domino’s to be considered an
employer under the FLSA.42
All of these cases, from Saigon Grill to the pending class action cases in Colorado, have been filed
in the past four years. Delivery drivers, who have been a staple in the United States for many years,
are now so discontent that they are seeking legal recourse. What is it about the present situation that
makes the extreme action of taking their employer to court appealing?
This brings us back to the hapless delivery driver who was short-changed on his tip. He makes nine
more deliveries that night and gets an average tip of $2 per delivery, meaning he earns $20 in tips.
He travels 50 miles total on deliveries. The restaurant owner pays him $7.25 an hour, the federal
minimum wage, and he works four hours that night. His earnings would total $49 or $12.25 an hour.
That is a decent wage for a job that only requires a driver’s license and a running car – except that
the driver’s expenses are not factored into that wage. For simplicity’s sake, let’s use the IRS mileage
reimbursement rate of 55 cents per mile as the rate that the driver incurs in costs.43 After driving 50
miles, the driver’s costs would be $27.50, and his net wages at $21.50 or $5.37 an hour. This is well
below the minimum wage. Additionally, the owners of the restaurant may not have properly informed
the driver about claiming his tips, so they may not be able to claim the driver’s tips as a part of his
wage. If this continues, it will take only a few months, a few fill-ups at the pump and a few trips to the
mechanic for the driver to realize that he is getting the short end of the deal.
33 Yelp,
“Saigon Grill” http://www.yelp.com/biz/saigon-grill-new-york. Retrieved August 4, 2011; MenuPages,
“Saigon Grill” http://www.menupages.com/restaurants/saigon-grill-2/. Retrieved August 4, 2011.
34 “Boycott Saigon Grill,” http://boycottsaigongrill.blogspot.com/. Retrieved August 4, 2011.
35 Bass v. PJCOMN Acquisition Corp., No. 09-cv-01614-REB-MEH, 2011 U.S. Dist. LEXIS 58352
(D. Colo. June 1, 2011).
36 Id. at *2.
37 Darrow v. WKRP Mgmt., LLC, No. 09-cv-01613-CMA-BNB, 2011 U.S. Dist. LEXIS 59388
(D. Colo. June 3, 2011).
38 Smith v. Pizza Hut, Inc., No. 09-cv-01632-CMA-BNB, 2011 U.S. Dist. LEXIS 76793 (D. Colo. July 14, 2011).
39 Wass v. NPC Int’l, Inc., No. 09-2254-JWL, 2011 U.S. Dist. LEXIS 32761 (D. Kansas March 28, 2011).
40 Laroque v. Domino’s Pizza, LLC, 557 F. Supp. 2d 346 (E.D.N.Y. 2008).
41 Ping Chen v. Domino’s Pizza, Inc., No. 09-107, 2009 U.S. Dist. LEXIS 96362
(D. N.J. October 16, 2009)
42 Id. at 11-13.
43 “IRS Increases Mileage Rate to 55.5 Cents per Mile,”
http://www.irs.gov/newsroom/article/0,,id=240903,00.html. Retrieved August 4, 2011.
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Employment Newsletter
August 2011
For many small businesses, the delivery driver represents an integral part of the business. For
many unskilled workers, delivery driving can be a lucrative job if they can work hard, get enough
deliveries and make enough in tips. So, how can businesses avoid liability and drivers ensure that
they are being properly compensated? First, tips have to be properly claimed by the business owner
and the driver. Failure to properly claim tips as a part of the delivery driver’s wage can give rise to
liability. Second, both driver and company have to properly account for the costs incurred by the
driver. A straight expense reimbursement for mileage would be an easy way to mitigate this issue.
An alternative would be for the restaurant owner to impose a delivery charge paid to the driver on all
delivery orders and limit the delivery area to keep the driver’s costs low and ensure that he makes
minimum wage after his costs. Finally, franchisors should examine their franchise agreements
and relationships to ensure that either (1) their franchisees are not violating the FLSA in their
compensation plans or (2) they do not exert enough control over the employees of the franchisees’
restaurants to be considered employers.
As claims continue to be brought in this area, Wilson Elser stands ready to assist employers and
in-house counsel on issues and questions relating to the Fair Labor Standards Act as well as the
distinctions between independent contractors and employees.
Wilson Elser is a full-service law firm
with more than 800 attorneys in 23 offices
throughout the United States. Founded
in 1979, it ranks among the top law firms
identified by The American Lawyer and is
listed in the top 50 of The National Law
Journal 250. Wilson Elser serves its loyal
and expanding global client base with
innovative thinking, valuable experience
across a full breadth of disciplines and a
keen understanding of their respective
businesses. More information is available
at www.wilsonelser.com.
This communication is for general guidance only and
does not contain definitive legal advice.
© 2011 Wilson Elser Moskowitz Edelman & Dicker LLP.
All rights reserved.