FLSA “Kickback” Rule

Kayla Moreland , May 13, 2015

FLSA “Kickback” Rule
FLSA “Kickback” Rule

Under the FLSA, employees’ wages must be paid unconditionally or “free and clear.” An employee cannot “kickback” directly or indirectly to the employer any part of the wage delivered to the employee.  See 29 C.F.R. § 531.35.  This means that employers could violate the FLSA if they require employees to pay back a portion of their wages so that the wages fall below the minimum wage.

When can this happen?  (1) If your employer deducts from your wages to pay for an expense that was for the benefit of the employer; or (2) fails to reimburse you for those expenses.

This often arises when an employee is required to use his or her own vehicle for work-related travel.  In a recent class action lawsuit, for example, delivery drivers sued Domino’s alleging that Domino’s franchisees’ methods for reimbursing the drivers put them below the minimum wage in violation of the FLSA.  Specifically, the plaintiffs calculated that the franchisees’ $1 reimbursement per delivery did not accurately reflect the costs the drivers incur by using their own vehicles, resulting in an indirect kickback of $3.25 to their employer, which brought their hourly wages below federal and state minimum wage requirements.

Source: Doug Hass, Reimbursing Employees for Business Expenses: The FLSA Kickback Rule, April 24, 2015 http://www.jdsupra.com/legalnews/reimbursing-employees-for-business-expen-97163/

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