The gist: Two Waitr drivers say the fast-growing food delivery app company paid them and potentially thousands of other drivers less than minimum wage in a collective action suit filed in the Eastern District of Louisiana in New Orleans at the end of February.

The drivers claim their net pay fell below minimum wage, because Waitr doesn’t pay mileage expenses. Drivers earn $5 an hour plus tips. The Fair Labor Standards Act requires that employees be paid minimum wage “free and clear” of the cost of doing business. The provision is sometimes called the kickback rule.



“Congress intended that wage to be a fully take-home wage,” says Michael Leroy, a University of Illinois law professor who studies labor law and the gig economy.



When expenses cause take-home pay to dip below minimum wage, employers are supposed to square losses back to a $7.25 hourly wage. Class representative Jualeia Halley, who worked for Waitr as a W2 employee briefly in 2017, claims she drove an average 469 miles at a cost of $257.95 each week, according to the federal complaint. Driver Heather Gongaware, who still works for Waitr, says she averages 500 miles at $275 in weekly costs since she began driving for Waitr in 2016.



The suit calculates the mileage at 54 cents per mile, the IRS standard business mileage reimbursement rate.



“Waitr’s systematic failure to adequately reimburse automobile expenses constitutes a ‘kickback’ to Waitr such that the hourly wages they pay to Plaintiffs and the Putative Class Members was and continues to be below the minimum wage,” the complaint reads.



Calls to attorneys representing Halley and Gongaware were not returned.



Further, the suit alleges Waitr misclassified independent contractors

Drivers who work for Waitr as independent contractors are treated like employees, according to the complaint, and ought to be compensated that way. The suit claims Gongaware and other independent contractors were not paid proper overtime or minimum wage as a result of misclassification. Contractors don’t get the hourly wage earned by W2 employees. Around 95 percent of Waitr’s drivers are classified W2 employees, according to investor materials. The company claimed 8,700 drivers in its workforce at the end of December, not including another 6,000 added in its $300 million acquisition of competitor BiteSquad.



Misclassification claims have been common among gig economy outfits like Waitr. Competitor GrubHub faced a misclassification suit in California and prevailed. Many observers are beginning to sour on the opportunities provided low-wage earners in “Uber for X” companies, once hailed as the future of work.



“It’s fair to say that a lot of drivers feel they were oversold the flexibility or the pay,” Leroy says of delivery employees in general.



Domino’s franchises have paid out millions on kickback cases. Courts awarded $1 million in damages to 163 Domino’s drivers working for a franchise in Cincinnati and $850,000 to 411 drivers in Dayton, Ohio. Another Domino’s suit was filed by a driver in Texas last year. Others have been filed in Colorado. As a corporation, Domino’s is insulated by its franchised structure. By contrast, Waitr is the central employer of thousands of drivers.



What to watch for: The scale of the case will be determined by how many drivers opt in. The court must certify the class before it can go forward, essentially approving the profile of an eligible plaintiff. The statute of limitations for FLSA cases is three years, should the court find that Waitr deliberately underpaid its employees. In that case, damages could be doubled. Waitr could force the case into arbitration, a tactic it used in a discrimination suit filed in Arkansas.

Founded in Lake Charles, the company moved into a new headquarters in Downtown Lafayette this year and is expected to add 200 jobs locally, expanding its core operations team. Texas billionaire Tilman Frititta acquired Waitr last year for $300 million, taking it public via a merger with a blank check holding company, creating Waitr Holdings Inc. Waitr delivered its first quarterly earnings report as a public company Thursday afternoon.



Waitr declined to comment on the litigation. This is a developing story.

