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Baouch v. Werner Enterprises, Inc.

United States Court of Appeals, Eighth Circuit

November 14, 2018

Yassine Baouch, on behalf of himself and all those similarly situated; Scott Larrow, on behalf of himself and all those similarly situated; Justin Burkholder; Robert William Herrmann; Radek Kohout; Jack Dean Michael; Steven Richard Milstead; James Myrick; Troy Edmund Townsend; Claire Elizabeth Bodo; Wayne Darius Grant; Adam Hoffman; Joseph Dewayne Thomas; Danielle Marie Barney; Chad Ryan Basso; Caroline Cecelia Busick; Christopher Clay Day; Bruce L. Marsha; Dale Don Oshiro; Aaron David Wing; David Allen Faykosh; Steve N. Neely; Jatarveiyon Kevin Lee Ashley; Michael Egli; Thomas Fisher; John A. Phillips; Marvin E. Rush; Marvin E. Rush; Adams Frank Akhalu; Steven Wayne Doane; Thomas A. Gillis; William A. Hamilton; John Ray Minor; Joseph Sablan Salas; Timothy Leonardo Smith; Terri Lynn Thacker; Brian Zeitz; Lance Edwards; Mark Sohmer; Joseph Horton Plaintiffs - Appellants
Werner Enterprises, Inc., doing business as Werner Trucking; Drivers Management, LLC Defendants - Appellees

          Submitted: May 15, 2018

          Appeal from United States District Court for the District of Nebraska - Omaha

          Before SMITH, Chief Judge, BEAM and COLLOTON, Circuit Judges.


         Appellants, a class made up of over 52, 000 experienced and student over-the-road truck drivers employed by Werner Enterprises, Inc., appeal from the district court's[1] grant of summary judgment in favor of Werner, and the court's dismissal of this action raising claims under federal and state wage and hour laws. We affirm.

         I. BACKGROUND

         In 2003, [2] Werner implemented an optional Payment Plan, which compensated drivers employed in positions that required them to travel and spend nights away from home on a regular basis. The Payment Plan offered non-taxable, mileage-based "Payments" to those drivers electing to participate in the Plan. In order to provide the Payments free of employment and income taxes, Werner's Payment Plan had to qualify as an "accountable plan" under Internal Revenue Service (IRS) Treasury regulations. Treas. Reg. § 1.62-2(c)(2). And, in order to qualify as an accountable plan, the Payment Plan needed to meet the IRS regulations' so-called business connection, substantiation, and return of excess expenses requirements. Id. § 1.62-2(c)-(f). To that end, when it established the Plan, Werner represented to the IRS, in part, that the Payments at issue were reimbursements for travel expenses that employees were reasonably expected to incur.

         Specifics regarding the Payment Plan are explained more fully by the district court. For general purposes here, however, it is key to note that because the Payments were not subject to employment and income tax withholding, the Payment Plan's primary effect was to cause participating drivers to receive more money in the form of take-home pay in their weekly paychecks. Student drivers participating in the Payment Plan received a low taxable daily rate and static untaxed Payments for every day they were considered away from home overnight. Participating experienced drivers received one portion of their pay based on an applicable mileage rate, subject to taxes, and the other portion as Payments consisting of a non-taxable sum based on the applicable Payment Plan mileage rate for days spent driving away from home overnight. Drivers electing not to participate in the Payment Plan received all of their pay, based on various per-mile rates, subject to employment and income taxes. To the extent non-participating drivers incurred meal and other incidental expenses while traveling, such expenses could be validated with receipts and deducted on their annual income tax returns. Participating drivers, however, could only deduct such expenses on their annual tax returns when the expenses exceeded their Payments, which sums were subject to the daily limit imposed by the federal meal and incidental expenses (M&IE) rate. Werner asserted in this action that it established its Payment Plan as a recruiting tool to attract drivers, as other trucking companies operated similar plans providing untaxed payments for meals and incidental expenses.

         The impetus for the instant action is Werner's inclusion of these Payments in its minimum wage calculation under the Fair Labor Standards Act (FLSA), the Nebraska Wage and Hour Act (NWHA), and the Nebraska Wage Payment and Collection Act (NWPCA). According to the class, because these Payments are reimbursements for traveling expenses incurred by them in furtherance of Werner's interests, they should be excluded from the regular rate calculation established under the FLSA and supporting Department of Labor (DOL) regulations as well as the NWHA. If such exclusion is accomplished, and the Payments made by Werner cannot be used to offset the calculation of minimum wages due, the class drivers assert that they do not make a minimum wage. Werner disagrees, representing that for purposes of calculating the employees' regular rate in determination of minimum wage requirements, these same Payments are not reimbursement for reasonable travel expenses, but rather are wages, since they actually compensate the class drivers for services rendered.

         Indeed, the class focuses a large part of its argument on what it claims is Werner's contradictory stance under the FLSA, wherein Werner describes these same Payments as payments that are not reimbursement for reasonable travel expenses for purposes of the employees' regular rate calculation, but rather are remuneration for services (i.e., wages). According to the class, the representations Werner made to the IRS (that these Payments were reimbursement for travel expenses Werner reasonably expected its drivers to incur) and those it made to the DOL are legally incongruent and the Payments should be excluded from the regular pay rate calculation under the FLSA.

         Reviewing the statutory scheme of the FLSA and the supporting DOL regulations, the district court held that to determine whether the Payments are included in the regular rate calculation, it had to evaluate 1) whether the Payments were reimbursements for expenses incurred solely for Werner's benefit or convenience; and 2) whether the Payments approximated actual expenses. Breaking the analysis down, and relying on the persuasive authority of the DOL Field Operations Handbook (DOL Handbook) as well as court precedent analyzing per diem payments and regular rate calculations, the district court held that the Payments were part of the regular rate. The fact that these Payments at all times reflected hours worked and functioned as a wage rather than a true per diem expense reimbursement, and also that the Payments plus the taxable wage received by the participating employees were "suspiciously close" to the total taxable wage of nonparticipants was equally persuasive in the court's evaluation of the matter. All these indicators pointed the court toward a conclusion that the form and purpose of the Payments were intended to act as remuneration for work performed under the FLSA.

         The court rejected the class's judicial estoppel argument as well, succinctly stating that the IRS regulations governing accountable plans are not necessarily compatible with the DOL regulations governing employees' regular rates for minimum wage purposes. Thus Werner did not (indeed, could not) take an inconsistent position in its representations to the various agencies. Based on similar analyses, the court likewise dismissed the class claims under the NWHA and the NWPCA. The class appeals.


         A. Standard of Review

         The class asserts that the district court erred in granting Werner's motion for summary judgment. We review a grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving party, and drawing all reasonable inferences in their favor. Lindeman v. St. Luke's Hosp. of Kan. City, 899 F.3d 603, 605 (8th Cir. 2018). We will affirm if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The class argues that the district court erred in finding that reasonable Payments made by Werner for traveling expenses it reasonably expected its over-the-road truck drivers to incur could be used to offset minimum wages due. It claims the court ...

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