Labor & Employment Law Daily Wrap Up, WAGE-HOUR—MINIMUM WAGES—D.N.M.: Employers may not ‘reasonably approximate’ delivery drivers’ vehicle expenses for FLSA minimum-wage compliance, (Jan 9, 2026)

By Steven D. Cole, J.D.

The employer must calculate its delivery drivers’ actual vehicle expenses when issuing reimbursements; the FLSA and its attendant regulations do not permit an employer to make a mere “reasonable approximation” of costs incurred.

A federal district court in New Mexico granted partial summary judgment to a pizza delivery driver, who sued her employer on behalf of herself and others similarly situated, alleging that she received sub-minimum wages in violation of the FLSA. The employer required its pizza delivery drivers to use their personal vehicles to make deliveries. The driver maintained that she was reimbursed at a rate that was less than the actual cost of delivery. The parties sought a ruling as to whether the FLSA demands that employers must track such expenses and reimburse employees “to the penny” or instead can rely on a “reasonable approximation.” The court rejected the employer’s interpretation of the FLSA and its accompanying regulations, holding that reimbursement for actual delivery-related expenses is mandatory, and that employers must keep sufficient records of reimbursements in order to demonstrate that their employees have been properly compensated (West v. BAM! Pizza Management, Inc., No. 1:22-cv-00209-SMD-JMR (D.N.M. Jan. 6, 2026)).

If an employer requires an employee to purchase certain items as a condition of employment (i.e., “tools of the trade”), the employer must reimburse the employee up to the minimum wage, since these costs primarily benefit the employer. In a previous ruling, the court determined that the vehicle costs incurred by pizza delivery drivers using their personal vehicles qualify as “tools of the trade,” as opposed to travel expenses, and thus require reimbursement under § 531.35. A majority of district courts have relaxed the regulation’s standard for employers calculating delivery expenses when employees use their personal vehicles.

Reasonable approximation. Citing the difficulty of attributing certain costs like depreciation, insurance, and maintenance between the employee and the employer, courts have permitted employers to use a reasonable approximation of expenses when issuing reimbursements. The only on-point decision from an appellate court on this matter, however, held that this approach conflicts with the FLSA’s clear mandate that an employee is entitled to the statutory minimum wage: “[W]hen determining whether a minimum-wage employee has been paid her minimum wages—a ‘reasonable approximation’ that amounts to an underpayment of an employee’s cost of providing tools most certainly would result in a violation of the [FLSA].” Parker v. Battle Creek Pizza, Inc., 95 F.4th 1009, 1015 (6th Cir. 2024).

The employer urged the court to reject Parker and offered several arguments to support the use of a “reasonable approximation” standard in this context. None were persuasive, as they were, for the most part, attempts to import the “reasonable” criterion used in other settings into the domain of minimum wage law.

For instance, 29 U.S.C. § 203(m) permits employers to include the “reasonable cost” of facilities that primarily benefit the employee when calculating an employee’s wage. But § 203(m) had no relevance here, as the employer did not furnish any facilities to its employees, who instead used their own vehicles for the benefit of the employer.

Overtime provisions. Nor did the FLSA’s overtime provisions further the employer’s argument. Subsection (e) of 29 U.S.C. § 207 instructs employers how to calculate an employee’s “regular rate” for the purpose of determining overtime pay and dictates that the regular rate excludes “reasonable payments” of certain reimbursable expenses incurred by the employee. Subsection (h) directs that payments made under § 207(e) must not be included when computing wages. Based on this, the employer concluded that because “reasonable payments” cannot be credited toward the regular rate of pay, then “reasonable payments for expenses are treated the same for both minimum wage and overtime purposes.” This non sequitur evinced a misunderstanding of these provisions, which simply articulate that an employee’s regular rate, for purposes of both overtime and minimum wage, does not include reimbursements.

Travel expenses. The employer next attempted to import language from an illustration in an overtime-related regulation allowing employers to use an employee’s “actual or reasonably approximate amount expended” when calculating the employee’s reimbursement for traveling expenses. 29 C.F.R. § 778.217(b)(3). Even if this regulation had some relevance to minimum wage law, it would not be applicable here, where the expenses at issue have been deemed “tools of the trade,” and not travel expenses.

Obligation to pay wages. The employer’s appeal to the “vast majority of federal courts to have considered the issue” siding with the “reasonable approximation” approach was mitigated by the fact that the employer cited three unreported district court opinions that preceded Parker. Parker, on the other hand, echoed the oft-repeated sentiment that an employer’s obligation to pay wages mandated by the FLSA is “absolute.”

While the court recognized the employer’s contention that measuring the actual vehicle costs incurred by its drivers is a complex task, it emphasized that the FLSA concerns itself not with “ease of accounting,” but in guaranteeing a basic wage. Furthermore, the court cautioned, “couching this dispute in terms of pragmatism obfuscates the issue at the heart of Plaintiff’s suit: whether Defendants can siphon off a portion of their employees’ wages to fund their business. The answer to that question is a resounding no.”

Delivery-related costs. Finally, the court clarified that it is the employer’s responsibility under 29 U.S.C. § 211(c) to record its employees’ delivery-related costs. This section states that employers must keep records of “wages,” including the total wages paid each period, and § 531.35 makes clear that an employee’s wage includes any amounts deducted for the benefit of the employer. Thus, like all other deductions, employers must maintain records of expenses to demonstrate that they have paid their employees the minimum wage.

The case is No. 1:22-cv-00209-SMD-JMR.

Judge Davenport, S.

Attorneys: Laura Farmwald (Biller & Kimble) for Deborah West and Joseph Belka. Darin Mackender (Fisher Phillips) for Bam! Pizza Management, Inc.

Companies: Bam! Pizza Management, Inc.

Cases: WageHour ClassActions MinimumWage NewMexicoNews