By Bob Pitcher, State Laws Newsletter
The U.S. District Court for Nebraska has held that per diems paid by an interstate motor carrier to its drivers to cover meals and incidental expenses counted as wages for purposes of calculating the minimum wage. The carrier paid its drivers either a flat wage of so many cents per mile driven or, at a driver’s option, a lower cents-per-mile rate and a cents-per-mile per diem allowance, under an accountable plan approved by the federal Internal Revenue Service. Since per diems are not, for tax purposes, considered wages, no income tax was withheld from those payments, and drivers choosing to receive them wound up with somewhat higher take-home pay.
On the other hand, those drivers had, by accepting per diems, given up an opportunity to claim those expenses as deductions on their personal income tax returns. The carrier admittedly used the per-diem payment method as a tool in recruiting drivers.
A group of drivers who had chosen per diems sued the carrier, claiming that the cents-per-mile wage rate they were paid did not alone meet federal minimum wage standards, and that the per diems they got couldn’t be counted toward that requirement. The court disagreed, noting that prior decisions involving other industries had considered per diems that varied with the work performed to be wages, and that in this instance the per diems served more like wages than like reimbursed expenses.
Nor, concluded the court, was the carrier estopped by IRS’s acceptance of the payments as reimbursed expenses for tax purposes. All the carrier had to show the IRS, noted the court, was that the drivers were likely to incur expenses that the carrier had a business purpose in reimbursing. Baouch, et al. v. Werner Enterprises, docket no. 8:12CV408, decided March 23, 2017