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Driver pay in IL, chain doesn't pay hourly

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Integraoligist

New member
So the Rosattis chain in Chicago expanded down to my neck of the woods, there are 2 locations in neighboring towns and we’ve been getting applicants that have worked as drivers there giving us the low down.

So, how their delivery works is… Drivers work from 11-5 shift or 5-10 shift… They get No hourly pay. Instead, when they take a delivery, they receive the $3 delivery fee plus whatever tip the customers give on top of it. That’s it. Needless to say drivers don’t stick around there too long. The drivers sit in their cars and wait for a delivery the entire time they work, doing nothing else but deliver when called upon. Then at the end of the night when they cash in their bank, they are givin their $3 per delivery in cash and are sent on their way. Not recoding any tips either… Nor do the drivers fill out any paperwork or get 1099ed.

How is it possible for a chain with 2 different franchise owners to do this? What I read via the IRS is, if you give someone a set time to work, they are an employee and get an hourly wage or salary.

I had my insurance agent a year ago ask why we are paying our drivers hourly as well, I told them what I was told via the IRS and she said that she has a few clients that don’t pay drivers.

What’s your guys take on this?
 
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I think it is a recipe for nightmares. They must be claiming the drivers are contractors but…
  1. Driver gets injured and claims work comp. Contractor status is disallowed and employer is on the hook for everything. In a car accident situation it could cost you everything you own.
  2. Driver causes accident. Store WILL be sued. Even if contractor status is upheld you will be on the hook for your defense costs (hired and non-owned coverage could protect you, but I have to think that an outfit that plays games with the driver status is probably also skipping the insurance)
  3. Driver gets audited. Claims employer should have withheld taxes and paid employers share taxes etc. Blows up.
Not being 1099’d is just nuts. Even if they are contractors the employer needs to be doing that!

It only takes one disgruntled former employee to bring down the house of cards.
 
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This is how most of the pizza places, including the chains, here hire their drivers. Some even go as far as making them fold boxes and wash dishes.
 
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They have 51 locations across multiple states, they have to have something figured out. Maybe its just all the franchisees responsibility and no one can come after corporate per the franchise agreement if something does happen?
 
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Integraoligist said:
they have to have something figured out.
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Dominos thought they had overtime figured out until they lost a class action suit about it. It would be interesting to ask a franchisee if they have an IRS determination of status using form SS-8.

Even if they do have something figured out it is tricky ground for the rest of us. Contractor status is something you have to be able to prove if there is a claim to the contrary unless you have that IRS determination… in other words basically guilty until proven innocent. The basic tests that apply to us are:
  1. Makes own schedule
  2. Provides own tools
  3. Negotiates rate
  4. Provides service to more than one customer
Here is some more reading on the subject: https://www.irs.gov/Businesses/Smal...ependent-Contractor-Self-Employed-or-Employee

This next link is very helpful too. In particular have a look at the following points out of the 20 listed:
3rd (intergration), 4th (control of who performs work), 7th (scheduling), 14th (tools, materials thin hot bags), 17th (multiple customers),

http://www.oregon.gov/ODA/shared/Do...ces/20FactorTestforIndependentContractors.pdf
 
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I’d be fascinated to hear what the Illinois DOL has to say about that! Unless I’m dumber than I thought… and I don’t want to rule that out… that’s not even close to legal.
 
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Integraoligist said:
So the Rosattis chain in Chicago expanded down to my neck of the woods, there are 2 locations in neighboring towns and we’ve been getting applicants that have worked as drivers there giving us the low down.

So, how their delivery works is… Drivers work from 11-5 shift or 5-10 shift… They get No hourly pay. Instead, when they take a delivery, they receive the $3 delivery fee plus whatever tip the customers give on top of it. That’s it. Needless to say drivers don’t stick around there too long. The drivers sit in their cars and wait for a delivery the entire time they work, doing nothing else but deliver when called upon. Then at the end of the night when they cash in their bank, they are givin their $3 per delivery in cash and are sent on their way. Not recoding any tips either… Nor do the drivers fill out any paperwork or get 1099ed.

How is it possible for a chain with 2 different franchise owners to do this? What I read via the IRS is, if you give someone a set time to work, they are an employee and get an hourly wage or salary.

I had my insurance agent a year ago ask why we are paying our drivers hourly as well, I told them what I was told via the IRS and she said that she has a few clients that don’t pay drivers.

What’s your guys take on this?
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My thought is ask your accountant what is in compliance for your business in your state. Each state has their own definition for tipped employees and compensation.
There may also be definitions as far as the role of a tipped employee. If a tipped employee is performing the same duties as an hourly employee, the governing
agency may deem tipped employees to be paid the same as hourly employees. Possibly, if the delivery driver’s only responsibility is waiting for a delivery and not making dough, preping, answering phones, making pizzas and cleaning the store, like hourly employees, that employer is within their legal right to compensate the driver as a tipped employee.
 
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Google your state and tipped employee laws for example: “Colorado tipped employee laws” and my guess is you will find out what you need to know. Here is what I found for Colorado: https://www.colorado.gov/pacific/cdle/tipped-employees

“a tipped employee is any employee engaged in an occupation in which he or she customarily and regularly receives more than $30.00 per month in tips”

“If an employee’s tips combined with the employer’s cash wage of at least $5.29 per hour do not equal the minimum hourly wage of $8.31 per hour, the employer must make up the difference in cash wages. It is the policy of the Division of Labor that this rule applies on a weekly basis.”

I found this with regard to Illinois law: “Tipped employees must be paid minimum wage, but an employer may take credit for the employee’s tips in an amount not to exceed 40% of the wages. An employer may pay a training wage for tipped employees 18 and over in the amount of $4.65 for the first 90 days if applying the tip credit of 40% or $7.75 if utilizing the tip credit. After 90 days, the rate must be increased to $4.95 if not utilizing the tip credit.”

It would appear that there is no way under Illinois law to not pay an employee at least $4.95 per hour (after the first 90 days)

Similarly, one can find state specific information about contractor status. Here is some interesting reading regarding Illinois law: https://www.illinois.gov/idol/FAQs/Pages/ECAFAQ.aspx

I found these interesting:

An individual performing services for a contractor is considered to be an employee except if is shown

  1. []the individual has been and will continue to be free from control or direction over the performance of service,
    [    ]the service performed is outside the scope of the usual course of services performed by the contractor and
  2. the individual is engaged in an independently established trade or business or the individual is deemed a legitimate sole proprietor or partnership under subsection c of Section 185/10.
A civil penalty not to exceed $1500 for each violation may be imposed. A separate violation occurs for each person improperly classified and for each day on which a violation continues.

For example, if a contractor misclassifies two persons for two days the maximum penalty is $6000. A contractor who willfully violates the Act or who obstructs an investigation can be subject to penalties of double the amount.

Once a person performing services is found to be an employee under the ECA and is found to have been improperly classified, that employee is entitled to all rights and benefits to which employees are entitled under other applicable state laws. A person who is misclassified shall be entitled to receive all salary, employment benefits, or other compensation which the individual lost as a result of the misclassification, including but not limited to all lost wages resulting from not being paid the minimum wage or overtime. An employer can be ordered to reimburse the person for improper deductions such as lost unemployment or workmen’s compensation benefits or to have contributions made on the employee’s behalf.
 
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I know this is a huge issue for Domino’s stores and while the issue is on all franchisee’s radar, some stores do it differently but the general consensus now is to simply pay minimum and make it up elsewhere- most often that is mileage.
I paid drivers $5/hr and made the difference up if tips did not bring them to minimum. I also paid a generous mileage; Most franchisees now just pay minimum and pay no (essentially) mileage.
 
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damn I wish I was in CO…in CT I am told that only bartenders & servers are allowed to get paid as tipped employees so my guys get $9.60 vs $6.40 per hour although I am pretty sure just about everyone else pays the lower amount regardless
 
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famousperry said:
I am told that only bartenders & servers are allowed to get paid as tipped employees
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Google is your friend. I googled CT and it looks like you are right:

“A “service employee” is defined as any employee whose duties relate solely to the serving of food and/or beverages to patrons seated at tables or booths, and to the performance of duties incidental to such service, and who customarily receives gratuities. This means that a tip credit (toward the minimum wage) can be taken only for waiters and waitresses, and only during the time for which they are actually serving patrons at tables or booths, or performing closely related duties, and when they are receiving gratuities.”

Bummer.
 
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It never ceases to amaze me at all these discussions about paying well below minimum wage and having to make it up if tips don’t get there. There seems a real driver for many businesses to try and get to the lowest possible cost at the expense of the employee.

I had two very sucessful stores, which I sold last year and whilst minimum wage (in the UK) was a starting point I had very low turnover and had drivers and in stores who had worked for me for 9+ years, most were 3 or 4 years service even bearing in mind the nature of this business.

If you are going to try and screw staff or scrap the bottom of the barrell you’re just kidding yourself. I once had a fellow franchisee ask me why I had such low turnover and when I told him what I paid he siad he wasn’t going to pay that much but in the next breath told me he couldn’t keep any of his staff.

When I sold, wages dropped, staff meals dissappears, uniform deposits came in and general staff were just seen as an expense - guess what? most left within a month and they are desperate for staff!!!
 
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If you are going to try and screw staff
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You are confused.

The wage and tip picture in the US is very different from in the UK. Drivers in a busy store are typically the best paid employees there, on busy nights making more than the manager and always making more than the cooks. They are certainly not getting screwed when an employer pays the tipped minimum.

The average tip in my store for delivery is close to $5. A driver who takes 15 deliveries is going to get about $70-75 over the course of a 4-5 hour shift. When we are slow that might drop to 10 deliveries but when we are busy it could be 25. We pay $6 wage, so when they are getting 15 deliveries a night they are making over $20 per hour… We have NEVER had to pay anything to make-up to minimum wage as the worst the drivers ever do is around $12 per hour. (Minimum here is 8-something) We have also never had a problem getting or keeping drivers in general. We do sometimes struggle for day shift drivers as most of our drivers have another main job and doing delivery at night is just extra.

If they drive their own car they also get mileage but mostly they drive company cars.
 
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I just heard that there is going to be a Rosati’s in Wausau WI, about 1.3 hours south of me.
If they try to do that pay scale here, it will not fly. They’re going to have a tough time even finding people to work for great money
 
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bodegahwy said:
You are confused.
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and taken slightly out of context as well! 😉

Not aimed at you or indeed your scenario, was aimed at the prior comments about not even paying (any) mileage and other ways of getting around the system (contractor status etc). I know tipping is much different in the USA than in the UK.

At the end of the day if your guys are coming out well paid - thats great, its the ones who are being taken advantage of that my observation/comment was aimed at! 🙂
 
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aimed at the prior comments about not even paying (any) mileage and other ways of getting around the system (contractor status etc)
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OK and agreed. I have zero sympathy for those that are trying to game the system.

While every business owner has the right to try and minimize costs in the business those efforts need to stay within the rules. As long as they are abiding by the laws I have little problem with trying to pay less… the market will take care of that.

On the other hand, BSing contractor status, undeclared sales and cash wages all should result in getting caught and punished in my book. Those of us who follow the rules have enough hard work to do without having to compete with other stores that do not!
 
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