A major ruling out of the District of New Mexico confirms what delivery drivers have long suspected: lowball mileage reimbursements that don’t cover real driving costs can violate the federal minimum wage law.
If you’ve ever delivered pizza using your own car and felt like your reimbursement check didn’t come close to covering gas, maintenance, insurance, and wear and tear, a new decision in West v. BAM! Pizza Management, Inc. may be directly relevant to you.
The Core Ruling: Employer’s can’t guess to meet minimum wage rules.
On January 6, 2026, U.S. District Judge in New Mexico issued a decision rejecting a tactic used for years by pizza delivery companies across the country: paying drivers a flat per-delivery fee or low mileage rate based on a rough “reasonable approximation” of driving costs, regardless of what those costs actually were.
The Court held that under the Fair Labor Standards Act (FLSA), employers cannot rely on an estimation of expenses that shortchanges drivers by framing their rate as a “reasonable approximation”. Instead, when a reimbursement rate falls short of a driver’s actual vehicle expenses, and that shortfall drags the driver’s pay below minimum wage, the employer has violated the law. As the Court put it, the federal minimum wage guarantee is “absolute,” and companies must reimburse drivers’ real costs “to the penny” rather than relying on guesswork that conveniently favors the company’s bottom line.
The Court also ruled on a second critical issue: who is responsible for keeping records of these expenses. The company argued it was the drivers’ job to track their own costs. The Court disagreed, holding that employers have an independent legal duty under the FLSA’s recordkeeping provisions to maintain records sufficient to show that drivers were actually paid the minimum wage. A company that chooses to send employees out in their own cars, without ever tracking what those deliveries really cost, cannot then turn around and blame the employees for the company’s own lack of records. If an employer fails to keep adequate records, courts can use a more flexible, employee-friendly framework (going back to a 1946 Supreme Court case, Anderson v. Mt. Clemens Pottery Co.) to determine what’s owed.
In response, the employer sought an immediate, interlocutory appeal of the decision—something that would be somewhat unusual, since normally an appeal only happens after a final judgment is entered, which did not happen here. The district court rejected this request.
Then, the employer made a similar request directly to the Tenth Circuit, asking for a writ of mandamus that would hold, essentially, that the district court got it wrong. The Tenth Circuit, however, refused to take up the case.
Why This Decision Matters Nationally
This ruling is significant because it is one of the first district court decisions to apply the Sixth Circuit’s landmark 2024 ruling in Parker v. Battle Creek Pizza, which was the first and only federal appeals court decision to address this exact issue. For years, most district courts around the country had sided with pizza chains, allowing companies to use rough approximations instead of tracking real costs. Parker broke from that trend, and now the New Mexico court has followed suit, expressly rejecting the “majority approach” in favor of the rule that actually protects workers’ wages.
For delivery drivers, the takeaway is simple: If your reimbursement rate doesn’t come close to covering what it actually costs to drive for deliveries, and your paycheck effectively falls below minimum wage as a result, you may have a valid legal claim — even if your employer calls its reimbursement rate “reasonable.”
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