Pizza Hut Drivers Claim $320 Million Mileage Underpayment

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Pizza Hut delivery drivers say that the bankrupt company’s largest U.S. franchisee shortchanged them on payments for using their own vehicles, adding to the list of cases roiled by massive claims from former employees.

Restaurant operator NPC International Inc. reimbursed the drivers for miles at such a low rate that they were underpaid by $4 to $12 per hour, according to a court filing Monday. With the claims topping $4,000 each from 80,000 drivers, the total could exceed $320 million.

A bankruptcy judge ruled Tuesday that their claims must stay on hold for now while NPC’s reorganization proceeds. Still, their demands may resurface later in the process, much like other bankruptcies where creditors were confronted by workers who say they’ve been mistreated. In some cases, financiers were pushed to set up compensation funds to ease the burden on people who lost their jobs.

The dispute concerns the difference between the mileage reimbursement rate of 57.5 cents a mile set by the Internal Revenue Service and the 25 to 35 cents typically paid by NPC, according to the drivers. Shifts typically lasted seven hours, with five on the road and drivers bearing out-of-pocket costs such as gasoline, depreciation, insurance and maintenance, they said.

Miles Lost

On top of that, the drivers said, the number of miles they drove was undercounted. They claim top executives were aware of the alleged short-changing and have sought in legal filings to hold them personally liable.

Lawyers for NPC had asked for a stay against the claim to be extended to protect the executives from the driver lawsuit. Bankruptcy Judge David R. Jones ruled in their favor; similar stays are customary in Chapter 11 filings against all other litigation until the case is resolved.

In documents filed July 1 as part of its bankruptcy, NPC said it had trouble keeping drivers because more demand for deliveries amid the pandemic meant fewer were available, and because falling demand for its own products meant reduced tips. “As a result, the company has no other option but to increase wages to retain delivery drivers,” NPC said.

The company budgeted $230,000 for reimbursable expenses owed from before the bankruptcy, a category that includes mileage as well as costs of owning or leasing a vehicle, cellphones, transportation, lodging, and dining.

Payback Demands

Workers at bankrupt companies have been demanding payment for lost severance or other benefits. Employees dismissed by Art Van Furniture Inc., for example, demanded its private equity owner reimburse money they contributed to their own flexible spending benefit accounts. Toys “R” Us employees pressed financiers to create a $20 million hardship fund for workers such as clerks, cashiers and warehouse staff hurt by the retailer’s liquidation.

NPC previously filed a Chapter 11 reorganization plan with options for either a sale of its Pizza Hut and Wendy’s businesses or a reorganization that would cut its debt. Kevin Bostel of Weil Gotshal & Manges, who represents NPC, said in court Tuesday that its Pizza Hut and Wendy’s outlets are performing well and the sale process is underway with a number of potential buyers interested in bidding.

Jones also approved a motion that lets NPC conduct a rights offering in connection with its reorganization plan.

©2020 Bloomberg L.P.

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