This story has been updated.
Papa John’s International says it has agreed to pay $12.3 million to settle a class-action lawsuit accusing the company of underpaying mileage reimbursements to its pizza delivery drivers in six states.
The suit, filed in federal court in St. Louis in 2009, represents about 19,000 drivers in Missouri, Florida, Illinois, North Carolina, Arizona and Maryland. The court record notes that a settlement was agreed upon earlier this month.
Papa John’s disclosed in its second-quarter earnings announcement Tuesday that a preliminary out-of-court agreement had been reached.
Other than stating the settlement amount, the Louisville-based company did not say if it changed its driver compensation practices as part of the settlement. As it has all along, the pizza chain denied any wrongdoing.
But attorneys for former pizza driver William Perrin of St. Louis detailed a corrupt scheme in which drivers “kicked back” money to the company by receiving lower reimbursements for the use of their vehicles to deliver pizzas.
According to the complaint, drivers were typically paid between $1 and $1.50 per delivery, regardless of distance, rather than the 45 to 55 cents per mile rate recommended by AAA and the IRS. That scheme cost the drivers $1.50 to $5.33 per hour, giving them a net hourly pay ranging from $1.48 to $5.75, according to the lawsuit.
“The net effect of (Papa John’s) flawed reimbursement policy, instituted and approved by company managers, is that they willfully fail to pay the federal minimum wage to their delivery drivers,” the suit states. “Defendants thereby enjoy ill-gained profits at the expense of their employees.”
Phone calls to a Papa John’s spokeswoman and to the plaintiff’s attorneys were not returned Thursday.
The $12.3 million settlement took a large bite out of Papa John’s second-quarter earnings. After deducting for the expected settlement payment, its quarterly profit fell 36 percent to $10.8 million. The proposed settlement is subject to court approval.
Reporter James McNair can be reached at firstname.lastname@example.org or (502) 814-6543.
Correction: An earlier version of this story incorrectly stated that the federal court record made no mention of a settlement. A docket entry a day earlier noted that the parties reached a settlement.