Court Revives Papa John’s Mileage Case: When Costs Cut Into Drivers’ Pay

A pizza delivery driver’s challenge to a 35-cent-per-mile reimbursement rate is back before a federal court in Colorado, reminding employers that mileage reimbursements can create wage-and-hour exposure.

The Tenth Circuit revived the driver’s complaint against a Papa John’s franchise operator, which now faces minimum wage and overtime claims.

Driver Files Wage and Hour Class Action

In 2023, Steve Mighell worked for a Papa John’s franchise. He said the company reimbursed drivers at a flat 35 cents per mile – a rate too low to cover the cost of using his own car for deliveries. He claimed the insufficient mileage reimbursement pushed his pay below the federal minimum wage and reduced his overtime pay. 

Mighell filed a class action lawsuit alleging federal and state wage-and-hour claims.

The district court dismissed the case after concluding Mighell had not shown an injury. It relied on pay stubs provided by Papa John’s showing that Mighell’s wages and tips remained above minimum wage, even after estimated vehicle expenses.

On appeal, the Tenth Circuit said the district court erroneously put the cart before the horse. Mighell’s allegation that unreimbursed delivery costs pushed his pay below minimum wage was enough to establish an injury at this early stage, the court explained. Whether Papa John’s pay-stub calculations correctly showed that Mighell’s pay remained above minimum wage after accounting for delivery expenses will be decided as the case proceeds.

Reviewing Mileage Reimbursement Practices

A quick review can help employers identify minimum wage risks when employees use personal vehicles for work. Start with these questions:

• Which employees use their own vehicles for work, and what minimum wage applies where they work?
• How do drivers’ tips and unreimbursed work-related expenses affect an employer’s ability to claim a tip credit?
• Does the mileage rate reflect what employees actually spend to operate their vehicles for work?
• How does the company’s rate compare with the IRS standard mileage rate and local driving costs? (The IRS rate is a benchmark, not an FLSA requirement.)
• After vehicle expenses, does any employee’s pay fall below the applicable minimum wage for the workweek?
• Is the rate regularly reviewed as fuel, insurance, maintenance and other costs change?
• Does payroll have the mileage, reimbursement, time and pay data needed to run the calculation and quickly fix shortfalls?

A consistent flat rate may simplify administration, but it doesn’t establish compliance on its own. Employers need records and a repeatable review process to confirm that unreimbursed delivery-related vehicle expenses don’t cut into minimum wage or overtime pay.

More info: Mighell v. HPG Pizza I, LLC