Food franchises are increasingly in demand now for fast delivery services. This leads to more debates on how reimbursements are being offered to the delivery drivers when they make trips from the restaurants to deliver the order to hungry consumers. This has resulted in the owners experiencing more pressure. They have to make sure that the mileage reimbursement complies with the labor laws, both at the state and the federal levels. If the franchisees fail to do so, they can face expensive lawsuits, which is good neither for their pockets nor their reputation. Therefore, they need to be thoroughly aware of how to comply with the labor laws at both levels and have proper knowledge of the tools that will help them on the way.
A Proper Understanding of Labor Laws
As per the FLSA or the Federal Labor Standards Act, employers have to pay the minimum wage to their employees. Several people working in the foodservice industry belong to the group of minimum wage employees. Even delivery drivers fall in that category. The difference between the delivery drivers and their in-store colleagues is that the former has to depend on a vehicle to carry out the job they have been assigned. In a majority of the cases, drivers prefer using their car. This implies that these delivery drivers have to pay for the fuel they use to deliver the order from the franchise to the consumer, from their own pockets.
Aside from that, they also have to support the costs they incur on maintenance as well as any wear and tear. If, as an employer, you are paying the minimum wage or slightly above it, the extra costs can lead to a violation of the minimum wage law. So, reimbursing them is important. The reason behind this is that you calculate the wage subtracting the unreimbursed amount they have to pay from their own pockets to complete their job from the employee’s earnings. Suppose, a minimum-wage employee pays a dollar a mile to ensure their vehicle is operating properly and they can reach the consumers as fast as possible.
Now, if you reimburse the employee 95 cents, you pay them 5 cents short of the minimum wage. This deficit, when multiplied by the miles they travel every week, gives you an estimate of the amount they can earn. If they are not paid that amount, their paychecks are bound to fall much below the stated minimum wage. In case you overlook that or fail to reimburse them for the extra costs, you will probably face litigation or pay penalties imposed by the government.
Maintaining Additional Compliance
Aside from the FLSA at the federal level, the franchisees have to comply with the state labor laws for their respective states. The fact of the matter is, the employee-protection laws are more stringent in states. These laws mention specific requirements in case of deductions or expense reimbursements. California is one such state which has some of the most complex labor laws a franchisee might come across.
One such law is the California Labor Code Section 2802. According to this law, employees have to be reimbursed for every expense they are exposed to while carrying out their responsibilities. This puts a greater load on the franchisees to take every expense into account and reimburse the employees accordingly. This is kind of mandatory irrespective of the wage an employee receives. Similar laws have been implemented in other states such as South Dakota, North Dakota, Massachusetts, as well as New Hampshire. Illinois entered the list on the 1st of January, 2020.
IRS Rate Isn’t Up to the Mark
Several employers make use of the IRS business mileage standard to reimburse the delivery drivers. This complies with federal labor laws. However, the chances of the drivers getting reimbursed improperly are pretty high. The reason behind this is that the standard business mileage rate is a fixed rate and is calculated only once a year. It depends on the average cost incurred while operating a vehicle in the previous year.
Utility of Technology
Using the data for each person is the best way an employer can reimburse the drivers. They have to make an estimate of the reimbursement rates that gives a clear picture of the driving costs of each delivery driver. Doing that manually takes a lot of time and could lead to incorrect estimations. Technology like mobile GPS will make things easy.
Using technology will at least give the franchisees a feeling of satisfaction. Not only will they pay the delivery drivers the amount they deserve, but they would also know that they are complying with the labor laws.