Court rules franchisees must base delivery reimbursements on actual costs

1. What the court decided A federal court ruled on January 7, 2026 that a Domino's franchisee cannot rely on a mere "reasonable approximation" to reimburse drivers for vehicle expenses when that method results in employees' pay falling below the minimum wage.

The decision requires reimbursements to be calculated using actual expense evidence or an accepted statutory/IRS proxy, so drivers are not left undercompensated after job-related vehicle costs are deducted. This isn't just a technical ruling — it changes the baseline employers must meet when offsetting work costs.

2. The legal standard the court applied The opinion makes clear that approximations that undercount employee costs are insufficient; reimbursements must be tied to demonstrable evidence of actual vehicle costs or to an accepted statutory proxy such as the IRS standard mileage rate.

In practice that means employers need verifiable documentation — mileage logs, receipts, or a defensible per-mile rate — rather than a fixed stipend calculated without supporting data. For workers this raises the bar for what counts as fair reimbursement under wage-hour law.

3. How this affects delivery drivers' pay For drivers, the ruling directly protects take-home pay by ensuring vehicle expenses can't be used to push earnings below minimum wage.

If employers subtract job-related costs or rely on low flat reimbursements, drivers may now have stronger claims for unpaid wages and back pay. The decision recognizes that the cost of fuel, maintenance, and vehicle wear-and-tear are real job expenses that must be measured, not guessed.

4. Risk for franchisors and franchisees Franchisors and individual franchisees face increased litigation risk if they use automated systems or standardized formulas that undercount worker expenses.

The opinion specifically flags the danger of uniform policies that don't account for variable, demonstrable costs across drivers and routes. That means corporate franchisors who mandate or approve centralized payroll and reimbursement systems should reassess exposure — they could be pulled into lawsuits even if a local franchisee set the specific rate.

5. Why automated and flat-rate systems are vulnerable Many pizza operations use automated dispatch, GPS mileage tracking, or company-wide flat per-trip or per-shift allowances to simplify payroll.

The court's decision warns that automation doesn't replace the need for accuracy: a system that understates mileage or applies a low flat rate can leave drivers undercompensated and employers exposed. Employers that favor simplicity over substantiation will need to justify their formulas with evidence or switch to accepted proxies.

6. Practical compliance options employers should consider Employers should audit current reimbursement policies and consider two defensible paths: document actual expenses with robust mileage and receipt records, or adopt an accepted proxy such as the IRS standard mileage rate and ensure wages still meet minimums after accounting for deductions.

They also should confirm state law requirements, since many states have stricter rules than federal minimums. Updating payroll systems, training managers, and keeping transparent records will be essential to limit liability.

7. What drivers should do now Drivers should start maintaining their own contemporaneous mileage logs, fuel and maintenance receipts, and notes about work-related trips — these records are the best evidence if pay is challenged.

Ask payroll or management for a clear breakdown of how reimbursements are calculated and whether any vehicle-related costs are treated as deductions. If you suspect underpayment, you can raise the issue internally and, if needed, consult a wage-and-hour enforcement agency or an employment attorney.

8. Potential enforcement outcomes and remedies Where reimbursements are found inadequate, employers may face back pay orders, liquidated damages, penalties, and attorneys' fees under wage-and-hour statutes.

Class or collective actions are a realistic risk in delivery work because many drivers operate under the same formulas across shifts and stores. That means a single undercounted rate can trigger exposure accumulating across dozens or hundreds of workers.

9. Operational changes that smooth the transition To avoid surprises, franchisors and franchisees should run pilot audits, adjust rates where necessary, and communicate changes to drivers well before implementing new payroll logic.

Consider technology that captures actual mileage per shift and ties reimbursements to documented miles, or explicitly adopt the IRS rate and demonstrate that net pay remains at or above minimum wage. Transparent communication reduces pushback and helps preserve driver morale — a small cost now can prevent costly litigation later.

10. Our two cents?

This ruling slices through a common shortcut in delivery pay: rough math that understates real costs won't hold up. If you deliver pizzas, keep receipts and logs; if you run a shop, treat reimbursement math like payroll tax — accurate and defensible. The takeaway? Make your reimbursement method provable, protect workers from wage erosion, and save yourself a potential legal oven fire.