There may be a class-action lawsuit lurking in your delivery charges if you automatically tack on extra fees for delivering pizza or other food directly to homes or businesses and that money doesn’t go straight to the delivery drivers.
That’s because Minnesota’s Fair Labor Standards Act has a provision that says such charges are tips—unless you clearly state that they are not.
Here’s what the law says: A gratuity is a “monetary contribution received directly or indirectly by an employee from a guest, patron or customer for services rendered and includes an obligatory charge assessed customers, guest or patron which might reasonably be construed by the customer, guest or patron as being payment for personal services rendered by an employee and for which no clear and conspicuous notice is given by the employer to the customer, guest or patron that the charge is not the property of the employee.”
The regulation implementing the section specifies that service charges listed on a bill that might be construed as payment to the employee rendering a service is a gratuity. Here’s what happened in a recent case.
Recent case: Matt Luiken worked for Domino’s Pizza, delivering pizzas. He sued on behalf of himself and other similarly situated delivery drivers in Minnesota, claiming that Domino’s charged customers a $1.50 delivery charge, but did not give any of that to the drivers.
Domino’s had, over the years, made some attempt to explain the service charge.
For example, it placed a note on pizza boxes stating that “Any delivery charge is not a tip paid to your driver. Please reward your driver for awesomeness.” Later, the language was placed on all delivery boxes, on the company website and in all advertisements.
When Luiken sued, Domino’s argued that customers understood that the charge was not a gratuity. It also argued that the case wasn’t a legitimate collective action. Instead, the restaurant chain claimed, each driver should have to prove that each customer was confused and thought the service charge was a tip in order to win.
The court rejected the pizza chain’s argument.
All the drivers have to show is that a hypothetical reasonable customer would think the charge was a gratuity. There was no need to find actual customers.
The court’s ruling also meant that the case could proceed as a class-action suit, instead of several individual cases. (Luiken, et al., v. Domino’s Pizza, No. 09-516, DC MN, 2011)
Final note: This case illustrates how easily a dispute over just a few dollars can escalate into a huge lawsuit.
Assuming that the charge belongs to the driver, his total damages would amount to $1.50 times the number of deliveries he made—perhaps a few thousand dollars. But multiply that over all delivery drivers in Minnesota, and soon you’re talking big bucks.
If you use a delivery charge and have any questions about whether the gratuity rule applies to you, consult your attorney right away. He or she can help you design a way to include the charge and not have it counted as a gratuity.
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