No one is paying that much (58.5 cents per mile)

[system]

Registered Guest:

Help me define exactly what “vehicle expenses” are. Is the cost of the vehicle (payments) an expense? Is the cost of a new tire an expense? Is the cost of a transmission repair and expense? Are those expenses only if the breakdown happens while on the job?

Also, over what time period are these expenses to be amortized to determine if minimum wage was paid?

To summarize my current questions to you:

1. Exactly what are “vehicle expenses” in the context of your statement?
2. Over what time period are those vehicle expenses amortized to calculate if minimum wage was paid?

Thanks!

The DOL accepts the methods published by the IRS. Here is what the DOL says about what the IRS determines about how to calculate vehicle expenses:

From page 31 of the DOL Field Operations Handbook (FOH) chapter 30

http://www.dol.gov/esa/whd/FOH/FOH_Ch30.pdf

Car expenses - employee’s use personal car on employer’s business.

In some cases it is necessary to determine the costs involved when employees use their cars on their employer’s business in order to determine MW compliance. For example, car expenses are frequently an issue for delivery drivers employed by pizza or other carry-out type restaurants.
(a) As an enforcement policy, the Internal Revenue Service (IRS) standard business mileage rate found in IRS Publication 917, “Business Use of a Car” may be used (in lieu of actual costs and associated recordkeeping) to determine or evaluate the employer’s wage payment practices for FLSA purposes. The IRS standard business mileage rate (currently 28 cents per mile)(EDIT: Now it is 55 cents per mile as of Jan 1 2009) represents depreciation, maintenance and repairs, gasoline (including taxes), oil, insurance, and vehicle registration fees. In situations where the IRS rate changes during the investigation period, the applicable rates should be applied on a pro-rata basis.

As you seem to be already aware, calculating and properly accounting for all of those expenses can be a chore. I assume that is why no pizza shops that I know of track actual expenses of drivers personal cars. If you would like to explore further the details of calculating those expenses in a method that the DOL approves of, I suggest that you go the information referred to in document "IRS Publication 917, “Business Use of a Car” to answer your questions. I take the easier route and just use the current approved rate of 55 cents per mile.

As the information in Pub 917 is now covered in Pub 463, I suggest you look there for your answer.

http://www.irs.gov/publications/p463/ch04.html#d0e3326

 

[paul7979]

I have covered this already. Tips cannot be used to cover expenses. They may be used ONLY as a ‘wage credit’ if applied properly, but otherwise are the sole property of the employee.

The how do you explain this quote from page 39 of the link that YOU provided and quoted from page 38?

paul7979 wrote:
So is my above interpretation of this section incorrect? Remember this is from 1988 when minimum wage was $3.35 per hour(your link, not mine).
from page 39 of http://www.dol.gov/esa/whd/FOH/FOH_Ch30.pdf

Quote:
On the other hand, where the employer pays $2.50 per hour in cash wages and claims a tip credit of $1.34 per hour and the employees recieve not less than $1.34 per hour in tips, the employees’ R/R is $3.84 per hour. In such cases, deductions of up to 49 cents per hour ($3.84 - $3.35) may be made for such things as uniform purchases and maintenance without cutting into the required MW

Just because it doesn’t fit your arguement, doesn’t mean its not there? Read page 39 and it shows clearly that tips can be used for mileage up to the amount the tip credit puts an employee over the required minimum wage.

 

[Registered_Guest]

Gregster,

You see, here is where I get confused. Earlier you agreed that it should be the higher of the two amounts. Now you are saying it is okay if we choose the lower of the two amounts.

So, can we come to some agreement on your position? At this point, here is what I’m hearing you say:

“It is okay for a driver to be paid less than minimum wage (net expenses) as long as he is being paid the IRS rate for mileage.”.

Is that an accurate representation of your current position?

 

[dman66]

I wouldn’t let gregster rile you up…Apparently the trend the last few years over at TIPTHEPIZZAGUY.COM message forum has been the employer should buy his drivers a brandnew car every one or two years with regards to mileage pay…Gregster is just one of 3,4 disgruntled drivers whom over the last few years plagued a website I always thought was meant for drivers whom are content doing this job & content the money they make doing it, I know for one I am…Also for customers whom wish to get some education on tipping…As far as I can see over there at TTPG.com message forum, I feel the website message forum is a turn off to customers seeking education on tipping & has taken a drastic turn for the worse the last few years, thx to these disgruntle drivers, all me, me , me…I seriously doubt gregster is happy with his job & thinks its a great job driving…Do you all buy that?..I don’t…Its funny how the IRS mileage rate of 55 cents is continuously brought up over & over again, as if it was the GOSPEL of all laws…Yet when you dispute that the IRS also views tips as income & not gifts these same people cry & throw rocks at you…Go view the entertainment yourselves on gregster’s “PMQ” thread over there…

 

[Wizzle_Wassell]

dman66

If I were a customer looking at the TTPG site it would be a total turn off to me. If its supposed to be a ‘showcase’ to help educate customers on why drivers should eb tipped then the current inhabitants couldn’t be doing themselves more halm than good. The language and general content is just so adolescent that any good messages/contant (which occassionally there are) are simply lost in general abuse towards each other.

I generally think Grgsters intent on this issue is not bad, he’s just got so cuaght up in the detail (of which he readily admits even the authorities don’t understand) that he’s lost sight of the bigger picture. I’m quite happy with what I pay my guys, and if there not happy then go somewhere else (yet I know I pay more than my competition, I carry insurance, provide uniform and coats, staff meals etc etc). From my experience most drivers won’t insure their car for business, treat mileage and tips as wage and funnily enough if we’re talking about illegal - never declare the tips they make - now thats a whole other discussion!

 

[system]

Registered Guest:

Gregster,

You see, here is where I get confused. Earlier you agreed that it should be the higher of the two amounts. Now you are saying it is okay if we choose the lower of the two amounts.
So, can we come to some agreement on your position? At this point, here is what I’m hearing you say:

“It is okay for a driver to be paid less than minimum wage (net expenses) as long as he is being paid the IRS rate for mileage.”.

Is that an accurate representation of your current position?

I have just reviewed my latest posts and do not see where I said that. I may have missed it. Please quote the passage of mine you are referring to. Perhaps I misspoke or was less than clear in my explanation.

It is my understanding that all business expenses paid by the employee must be reimbursed up to the point that minimum wage is restored.

 

[Registered_Guest]

gregster:

Registered Guest:

Gregster,

You see, here is where I get confused. Earlier you agreed that it should be the higher of the two amounts. Now you are saying it is okay if we choose the lower of the two amounts.
So, can we come to some agreement on your position? At this point, here is what I’m hearing you say:

“It is okay for a driver to be paid less than minimum wage (net expenses) as long as he is being paid the IRS rate for mileage.”.

Is that an accurate representation of your current position?

I have just reviewed my latest posts and do not see where I said that. I may have missed it. Please quote the passage of mine you are referring to. Perhaps I misspoke or was less than clear in my explanation.

It is my understanding that all business expenses paid by the employee must be reimbursed up to the point that minimum wage is restored.

Thanks for the reply.

Above you said "The DOL accepts the methods published by the IRS. Here is what the DOL says about what the IRS determines about how to calculate vehicle expenses:"

And then you post the part where the DOL says that “as an enforcement policy” the IRS rate can be used instead of actual costs and recordkeeping.

Therefore, do you agree that as long as a driver is being paid the IRS rate there can be no minimum wage violations even if the actual costs are more than the IRS rate?

This is the way it reads. Therefore, it is technically possible, and even probable, that a drivers actual costs exceed the IRS rate, and then when the difference is deducted from the hourly wage, that wage would fall below minimum. However, the DOL is saying that as long as the IRS rate is being paid, there will be no “enforcement” - whatever that means.

 

[prenv]

just a question for gregster what type of insurance do you have as far as auto ,and did you make them aware that your car is being used for your field of work.
And as far as Dewar’s Pizza Bakery Post gregster needs to go to be very blunt dewar’s get off your high horse thats a very childish thing to do or say.I don’t feel its right he is voicing his views whether you like them or not.
I dont think its right for pmq to even consider locking the thread just because a few people got their bra’s tied in a knot no one is forcing you to read it move on .IF PMQ locks the thread i for one will boycott pmq.

 

[dman66]

I don’t feel there is any reason to lock this thread, after all, gregster is being very civil here…I tell you one thing for sure though…Anyone of you all go over to TTPG & voice a contradicting opinion, or even fact they don’t want to hear?..The few board disgruntles would give you an ear full of obscenities & the BoardMaster just stand around & watch…God forbid you play on their level though then you’d be a troll, or even worse spell something wrong? Watch out! LOL…

Hows that for educating customers that visit to seek info on why PizzaDrivers are not only worthy of tips but also 58 cents a mile?..I think this whole movement gregster is projecting is having, if not will have a counter productive effect…What ever happen to the good ole days of doing a pizzadriving job you like & happy with the money you make doing it?..I guess those days are all evaporating, at least at TTPG they are…

 

[system]

paul7979:

I have covered this already. Tips cannot be used to cover expenses. They may be used ONLY as a ‘wage credit’ if applied properly, but otherwise are the sole property of the employee.

The how do you explain this quote from page 39 of the link that YOU provided and quoted from page 38?

paul7979 wrote:
So is my above interpretation of this section incorrect? Remember this is from 1988 when minimum wage was $3.35 per hour(your link, not mine).
from page 39 of http://www.dol.gov/esa/whd/FOH/FOH_Ch30.pdf

Quote:
On the other hand, where the employer pays $2.50 per hour in cash wages and claims a tip credit of $1.34 per hour and the employees recieve not less than $1.34 per hour in tips, the employees’ R/R is $3.84 per hour. In such cases, deductions of up to 49 cents per hour ($3.84 - $3.35) may be made for such things as uniform purchases and maintenance without cutting into the required MW

Just because it doesn’t fit your arguement, doesn’t mean its not there? Read page 39 and it shows clearly that tips can be used for mileage up to the amount the tip credit puts an employee over the required minimum wage.

Paul, I’m sorry it took me so long for me to reply to this post. When I first read it, I didn’t really understand what you meant. (It was VERY late at night). When I read it again today, and took the time to understand what it meant, you had me flummoxed for quite a while. I had to do A LOT of research and reading to see if that example given in the Field Handbook actually matched with what the law says. The credit goes to you for finding that and understanding the significance of it. It seems to be an exception (although slight) to my current understanding of the relation of minimum wage, tip credit, and reimbursement. In my personal experience I have not seen (or heard of) this method being implemented.

Technically speaking, your (underlined) statement is incorrect. This statement is still true that “Tips in excess of statutory tip credit may not be credited against uniform purchase and maintenance costs” . Tips can only be credited to wages in a tip credit situation, but as you have noted, if the ‘direct wage’ plus the ‘tip credit’ adds up to MORE than the minimum wage, then the wages over minimum wage may be credited to expenses So wile your statement is technically incorrect, the outcome is the same, making your noted observation correct. Great Find!

From my new understanding, this is how that example works. The maximum tip credit an employer can take is 50% of the minimum wage. The MW is currently $6.55 per hour, so the maximum tip credit allowed is $3.275.

Say the employer elects to pay a direct wage of $4 per hour, but also takes the maximum tip credit allowed of $3.275.

$4 + $3.275 = a regular rate (R/R) of $7.275 per hour, which is $0.725 per hour ABOVE minimum wage. That $0.725 (73 cents rounded) can legally be used to offset business expenses paid my minimum wage employees.

The maximum amount that an employer could claim in ‘tips’ to offset expenses would be done this way. Pay the full minimum wage of $6.55 per hour AND the maximum allowable tip credit of $3.275 making the employees R/R $10.275 per hour allowing the $3.275 above minimum wage to go for mileage or other expenses.

My employer pays a tip credit wage of $4 per hour while ‘on the road’ and claims a tip credit of $2.55 per hour making my regular rate the full minimum wage of $6.55 per hour. In my situation, the full IRS mileage rate or actual cost must be paid, because my effective wage is never above minimum wage at any time.

Why doesn’t my employer (or anyone else that I know of) use tip credit in the ways described above? At first glance it seems to be a legal way to get more of my tips to cover business expenses (In a roundabout way). I don’t know why. My only guess is that there are tax or other implications of paying using this method that make it financially undesirable for the employer.

It seems to me the above methods are ‘legal’ according to what I have found in the DOL. This particular part might be better suited to a CPA as to why it is not employed.

My hat is off to Paul for pointing out something I wasn’t aware of. He is the first person that was able to do that and I have talked to hundreds of people and done many hundreds of hours of reading and research on this subject. I am happy that I learned something new.

For those of you who will now say “Ha! I TOLD you he was wrong the whole time!” What Paul found does not change anything I have posted. All of the quotes of law still stand. Paul just found a way that tip credit law could technically be used to offset vehicle expenses, but for some reason I am not aware of, it is not used in “practice” in the real world. I still stand by everything I have posted previously.

 

[system]

prenv:

just a question for gregster what type of insurance do you have as far as auto ,and did you make them aware that your car is being used for your field of work…

I do not have commercial auto insurance. The policy I carry defines ‘commercial use of a vehicle’ when business miles are more than 50% of total miles. I only work part time about 3 days a week for a total of about 15 hours a week. My personal mileage far exceeds my business mileage, so I am ‘good to go’ with my policy.

An for those who don’t already know, I report all of my tips. Even the 5 cent or lower ones. The $8 ones too. I personally believe that reporting 100% of tips is in the best interest of the employee and the employer for many reasons.

prenv:

And as far as Dewar’s Pizza Bakery Post gregster needs to go to be very blunt dewar’s get off your high horse thats a very childish thing to do or say.I don’t feel its right he is voicing his views whether you like them or not.
I dont think its right for pmq to even consider locking the thread just because a few people got their bra’s tied in a knot no one is forcing you to read it move on .IF PMQ locks the thread i for one will boycott pmq.

Thanks.

 

[Registered_Guest]

Gregster,

Have you had a chance to consider my question?

I’ll repeat for clarity:

Is it okay if a wage, after deducting actual vehicle expenses (as defined in IRS Pub 463), falls below minimum wage as long as the employee is being compensated at least the IRS rate per mile?

If your answer is “no”, could you elaborate/explain why and/or how you come to that conclusion?

Thanks!

 

[system]

Registered Guest:

Gregster,

Have you had a chance to consider my question?

I’ll repeat for clarity:

Is it okay if a wage, after deducting actual vehicle expenses (as defined in IRS Pub 463), falls below minimum wage as long as the employee is being compensated at least the IRS rate per mile?

If your answer is “no”, could you elaborate/explain why and/or how you come to that conclusion?

Thanks!

I’m sorry I didn’t answer that more clearly before. I literally spent all my free time yesterday (I had other things to do also) reading up on Paul’s question.

Simply put, my answer is “No”. Here’s why: The DOL “Field Handbook”, “Fact Sheets”, and the website in general are rewritten to make the law more understandable to business owners, employers, employees and laypeople. If you are ever in doubt about what is actually required by the law, you must either consult an Attorney and/or read the actual laws that the guidance was written from. The ‘official’ record of all federal laws is made available in as concise a form as possible in the CFR, or the Code of Federal Regulations. The CFR attempts to consider all federal laws and merge them together into one document (albeit HUGE!) that reflects the latest edition of all laws as sorted by subject. So here is what the CFR says about minimum wage compliance vs. deductions:

http://edocket.access.gpo.gov/cfr_2006/ … 531.35.pdf

§ 531.35 ‘‘Free and clear’’ payment; ‘‘kickbacks.’’

Whether in cash or in facilities, ‘‘wages’’ cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘‘free and clear.’’ The wage requirements of the Act will not be met where the employee ‘‘kicks-back’’ directly or indirectly to the employer or to another person for the employer’s benefit the whole or part of the wage delivered to the employee. This is true whether the ‘‘kick-back’’ is made in cash or in other than cash. For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer’s particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act. See also in this connection, § 531.32(c).

Driver’s cars are the ‘tools’ of the trade necessary to do the required work. The ‘kickback’ comes from the free use (the un-reimbursed portion of the mileage) of the drivers vehicle that is used to support the business.

It is my opinion based or reading the entirety of all I have on the subject and this passage specifically that if you were to allow a driver to drive a new Ferrari to deliver pizza, you could be found to be in violation of minimum wage laws.

But what if the driver is ok with only getting just 55 cents per mile when we (business and driver) both know his costs are much higher than that?

http://www.dol.gov/esa/whd/opinion/FLSA … 1_FLSA.htm

Please note that employees cannot waive their rights to receive the minimum wage. See Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945).

Not even if you have them sign something can an employee agree to be paid less than minimum wage under the FLSA.

So based on all that, you would have to reimburse the driver for any business expenses to restore the minimum wage. If you find any laws or case law that contradicts my opinion on the matter, please do share. I’d love to learn more.

 

[dman66]

The way I interpreted this is…Even if as an employer, you’re solely paying your employees the .55 IRS rate to deliver the pizzas & nothing else… The employee stays above the MIN WAGE with soley the tips reported, there is no violation…

 

[Registered_Guest]

gregster:

It is my opinion based or reading the entirety of all I have on the subject and this passage specifically that if you were to allow a driver to drive a new Ferrari to deliver pizza, you could be found to be in violation of minimum wage laws.

But what if the driver is ok with only getting just 55 cents per mile when we (business and driver) both know his costs are much higher than that?

I assume that you are comfortable that the 55 cents per mile covers most “normal” (non-ferrari) situations, and I will agree with that.

IRS PUB 463 includes “repairs” under “actual car expenses”. Back to my example of a driver needing a transmission repair one pay period. This repair costs, lets say, $1500.

During the two week pay period in which the driver had this repair done, he drove 8 shifts averaging 100 miles each. We paid him the IRS rate of 55 cents per mile or $440, plus $6.55/hr (min wage in my state). 80% of the total mile put on this vehicle during that period were for “business use”.

Based on pub 463, 80% of that $1500 qualifies as “actual car expenses” or $1200.

Am I in violation of minimum wage laws because I didn’t cover his actual expenses as defined in IRS pub 463?

 

[Registered_Guest]

Gregster,

I hate to have two outstanding replies going, so please make sure you see my post above to continue this discussion.

However, I do have one other question pertaining to your most recent post:

For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer’s particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.

Then you go on to say:

Driver’s cars are the ‘tools’ of the trade necessary to do the required work.

Based on that, if a driver were to purchase a car, and he was not reimbursed the purchase price of that car, there would be a violation of the act, correct?

 

[system]

The current IRS rate of 55 cents per mile is fine with me. I drive a 2002 6 cyl. 2WD Explorer.

(Rant moved by me to another more appropriate thread: So Gregster what action have you taken against your employer )

The DOL defers to the accepted IRS methods of determining costs. I don’t use the actual cost method, so I am not able to answer that question with any confidence. My guess is that you amortize the repair over a single tax years time, not one pay period.

http://www.irs.gov/pub/irs-pdf/p463.pdf

“Actual Car Expenses” starts on page 16.

Happy reading!

 

[system]

Registered Guest:

Gregster,

I hate to have two outstanding replies going, so please make sure you see my post above to continue this discussion.

However, I do have one other question pertaining to your most recent post:

For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer’s particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.

Then you go on to say:

Driver’s cars are the ‘tools’ of the trade necessary to do the required work.

Based on that, if a driver were to purchase a car, and he was not reimbursed the purchase price of that car, there would be a violation of the act, correct?

No, but I think I understand what you mean. Tools of the trade also applies to consumables like ‘blasting caps’ (they are actually mentioned in the CFR!) Some tools are inexpensive and can be considered in a single pay period. Consumables (I believe) are also not depreciated like capital expenditure items (cars and pizza ovens for example) are. That is why even though they are both ‘tools of the trade’ in the view of the DOL, they are handled differently under IRS rules. Does that answer your question?

 

[Registered_Guest]

Gregster,

I really am trying to follow, but many of these things seem contradictory. Like the “tools of the job” thing above. It seems pretty clear to me, that if you want to apply this as a car being a tool you need to do the job of delivery, that the employer must reimburse you the cost of the car or else be in violation of minimum wage law. That’s what it says. Or, maybe, in this case a car is not a tool. But you can’t have it both ways.

You seem to agree that even if I am paying 55 cents per mile I would still be in violation if the actual costs are more than 55 cents per mile. However, you keep saying that you don’t keep actual costs - and you don’t care about actual costs because you accept the 55 cents per mile.

If I, as a business owner, want to avoid violating minimum wage laws - don’t I need to know EXACTLY what the actual costs are for you to operate your vehicle - so I can know if I am (based on your arguement) in violation of minimum wage laws?

Your entire position opens up an huge can of worms that just lead to more and more questions like the one I posted above about the transmission repair. Pub 456 even includes lease payments. I know 2 of my drivers lease thier cars.

To argue your side of this, don’t you need to look past the 55 cents and directly into actual expenses as define in Pub 456 - in order to make ABSOLUTELY CERTAIN that there are no minimum wage violations?

 

[system]

Registered Guest:

Gregster,

I really am trying to follow, but many of these things seem contradictory. Like the “tools of the job” thing above. It seems pretty clear to me, that if you want to apply this as a car being a tool you need to do the job of delivery, that the employer must reimburse you the cost of the car or else be in violation of minimum wage law. That’s what it says. Or, maybe, in this case a car is not a tool. But you can’t have it both ways.

The ‘cost of the car’ IS included in both the ‘standard rate; and ‘actual cost; methods.

Actual car expenses include:
Depreciation, Lease payments, Registration fees, Licenses, Gas, Tires, Oil, Insurance, Repairs, Garage rent, Tolls Parking fees

Depreciation IS the cost of the vehicle spread out over time. The standard rate includes this also.
Registered Guest:

You seem to agree that even if I am paying 55 cents per mile I would still be in violation if the actual costs are more than 55 cents per mile. However, you keep saying that you don’t keep actual costs - and you don’t care about actual costs because you accept the 55 cents per mile.

See above
Registered Guest:

If I, as a business owner, want to avoid violating minimum wage laws - don’t I need to know EXACTLY what the actual costs are for you to operate your vehicle - so I can know if I am (based on your arguement) in violation of minimum wage laws?

The way to know exactly is to use the actual cost method and then take on the burden of collecting, and analyzing all of the applicable paperwork receipts, gas, repairs, depreciation etc. and then calculating the costs. If a guy drops off his application driving a new Ferrari, I’d reject the application for several reasons.
Registered Guest:

Your entire position opens up an huge can of worms that just lead to more and more questions like the one I posted above about the transmission repair. Pub 456 even includes lease payments. I know 2 of my drivers lease thier cars.

Leases are covered in the IRS pub also.
Registered Guest:

To argue your side of this, don’t you need to look past the 55 cents and directly into actual expenses as define in Pub 456 - in order to make ABSOLUTELY CERTAIN that there are no minimum wage violations?

To paraphrase someone else responding to me in another thread on these issues, It is impossible for a business owner to be in 100% in compliance with every law, regulation and policy in effect on him at every single moment. I agree.

If you feel that someone’s ‘actual costs’ may be far enough above 55 cents per mile that it may put you in jeopardy of a violation, I suggest that it is on you to be sure you are in compliance.

Just like most health inspectors wont shut you down for finding one crumb out of place, I suspect that most DOL investigations (if there even ever was one) would not fine you out of existence if one driver was found to be a few cents over 55 cents per mile.

I really am trying to answer your question as best I can, but…

Best stick to Nicks advice and consult competent professional advice when in doubt.