Baouch v. Werner Enters., Inc.
| Decision Date | 23 March 2017 |
| Docket Number | 8:12CV408 |
| Citation | 244 F.Supp.3d 980 |
| Parties | Yassine BAOUCH, on behalf of himself and all those similarly situated, et al.; Plaintiffs, v. WERNER ENTERPRISES, INC., and Drivers Management, LLC, Defendants. |
| Court | U.S. District Court — District of Nebraska |
Joshua S. Boyette, Justin L. Swidler, Matthew D. Miller, Richard S. Swartz, Swartz, Swidler Law Firm, Cherry Hill, NJ, for Plaintiffs.
Elizabeth A. Culhane, Joseph E. Jones, Patrick J. Barrett, Sarah L. McGill, Fraser, Stryker Law Firm, Omaha, NE, for Defendants.
This matter is before the Court on several motions. Defendants Werner Enterprises, Inc., and Drivers Management, LLC (collectively "Werner") filed the following motions: Motion to Exclude Expert Testimony, ECF No. 303; Motion to Decertify the Class and Collective Action, ECF No. 314; Motion for Summary Judgment, ECF No. 316; and the Motions to Strike, ECF Nos. 347 and 363. Also before the Court are the following motions filed by Plaintiffs: Motion to Partially Exclude Expert Testimony, ECF No. 311; and the Motion for Summary Judgment, ECF No. 321. For the reasons stated below, Werner's Motion for Summary Judgment, ECF No. 316, will be granted and Plaintiffs' Motion for Summary Judgment, ECF No. 321, will be denied. The remaining motions will be denied as moot.
The following facts are those stated in the Parties' briefs, supported by pinpoint citations to evidence in the record, in compliance with NECivR 56.11 and Federal Rule of Civil Procedure 56.
Werner is a logistics company engaged in hauling and delivering freight throughout the United States. Werner employs thousands of drivers to perform its freight transportation services. This case involves an optional payment plan for its drivers that Werner created pursuant to certain Internal Revenue Service ("IRS") regulations (the "Payment Plan"). The Payment Plan provided payments to drivers, ostensibly for meals and other incidental expenses drivers were expected to incur while traveling (the "Payments"). The primary issue in this case is whether the Payments were reimbursements for expenses, or compensation for work performed.
Werner's drivers were compensated as either experienced or student drivers. IRS Ltr., ECF No. 317–32, Page ID 21154. Werner implemented its Payment Plan for non-student, experienced drivers in 2004. Participation was limited to eligible drivers employed in positions2 that required them to travel and spend nights away from home on a regular basis. IRS App. Comm., ECF No. 320–3, Page ID 21674, 21677. The Payment Plan offered non-taxable, mileage-based payments, ostensibly representing reimbursement for meals and other expenses incidental to travel. Werner Educ. Materials, ECF 317–37, Page ID 21442. Eligible experienced drivers elected whether to participate in the Payment Plan during their new-hire orientation, but were permitted to change their participation status by opting into, or out of, the Payment Plan on a yearly basis. IRS App. Comm., ECF No. 320–3, Page ID 21674. Experienced drivers already employed in 2004 were given the opportunity to opt in to the Payment Plan at the time it was implemented and were permitted to change their participation status annually.
Eligible drivers that elected to participate in the Payment Plan qualified for Payments when driving and away from home overnight. IRS Ltr., ECF No. 317–32, Page ID 21155–156. Werner used a Home Time Counter program on its AS400 Computer System to track drivers' daily statuses. Id. If a driver returned home before 6:00 p.m. or left home after noon on a particular day, the driver would be considered "at home" that day. Id. "Drivers returning home after 6:00 p.m. from a trip that started on a day prior to the day in which they return home, and those leaving home before noon on a given day and returning on a subsequent day are considered away from home overnight."Id. If a driver was away from home overnight but unavailable for work, he or she was given "at home" status. Id.
Werner's experienced drivers were paid at various per-mile rates. Those enrolled in the Payment Plan received one portion of their pay based on the applicable mileage rate, subject to taxes, and the other portion as Payments—a non-taxable sum based on the applicable Payment Plan mileage rate for days spent driving away from home overnight. Werner Educ. Materials, ECF No. 317–37, Page ID 21440–442; see infra Table 1. The IRS imposed a special transportation meal and incidental expenses rate ("M & IE rate") that limited the daily amount of non-taxable Payments a driver could receive.3 In the event a driver's Payments exceeded the M & IE rate, the excess amount was subject to employment and income taxes. Werner Educ. Materials, ECF No. 317–37, Page ID 21441. Thus, no driver could receive a Payment amount that exceeded the IRS–imposed daily limit, but could receive less than the limit based on the Payment Plan mileage rate and the number of miles driven during a particular day. Id.
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. IRS App. Comm., ECF No. 320–3, Page ID 21675–676. To demonstrate how the Payments could increase take-home pay, Werner provided an example of how the Payment Plan would apply to experienced drivers in its educational materials, reproduced in the following Table 1:
Table 14 :
Example of Driver's Net Pay Per Week under Non–Per Diem and Per Diem Plans
Assumptions Current Plan Per Diem Plan
(non-participants) (Plan participants)
Taxable compensation rate per mile 28 cents 17 cents
Per diem rate per mile - cents 10 cents
_______ _______
Total rate per mile 28 cents 27 cents
Days away from home during week (on duty) 6 6
Miles driven during the week 2,300 2,300
Calculation of Net Pay
Taxable compensation $644.00 $391.00
Health Insurance (single) deduction ($17.88) ($17.88)
401(k) retirement savings plan deduction ($26.00) ($26.00)
_______ ________
Taxable Income $600.12 $347.12
Federal income tax withheld
(based on 1 withholding allowance) 66.63 28.68
State Income tax withheld (assume 4%) 24.00 13.88
FICA/Medicare withheld 47.90 28.54
______ _____
Total tax withheld $138.53 $71.11
Net pay before non-taxable per diem $461.59 $276.01
Non-taxable per diem - $230.00
_______ _______
Total net pay (excluding bonuses) $461.59 $506.01
Increase in net pay per week under per diem plan $44.42
Increase in annual net pay under per diem plan $2,310.07
Benefit per mile of per diem 1.9 cents
Percent increase in net pay 10%
Drivers electing not to participate in the Payment Plan received all their pay, based on various per-mile rates, subject to employment and income tax. To the extent non-participating drivers incurred meal and other incidental expenses while traveling, those expenses could be validated with receipts and deducted on their annual income tax returns. Steele Depo., ECF No. 317–3, Page ID 20072.
Drivers participating in the Payment Plan could only deduct such expenses on their annual tax returns when the expenses exceeded their Payments, which were subject to the daily limit imposed by the federal M & IE rate. Werner Educ. Materials, ECF No. 317–37, Page ID 21441. If an experienced driver was providing services away from home, but not actually driving due to a break down, waiting for a load or pick up, etc., he or she would not receive Payments for that time because the driver was not accumulating miles.5 IRS App. Comm., ECF No. 320–3, Page ID 21676.
Werner asserts that it sought to establish its Payment Plan as a recruitment tool for attracting drivers to the company.
Steele Affd., ECF No. 324–2, Page ID 23040. Werner claims it had knowledge of other trucking companies that operated similar plans providing untaxed payments for meals and incidental expenses, and that this encouraged Werner to offer a similar program for its drivers. Wingert Depo., ECF No. 317–2, Page ID 20016. An IRS tax examiner concluded that Werner developed and implemented its Payment Plan to recruit new drivers and retain current drivers. IRS Notice of Proposed Tax Adjustment, ECF No. 320–3, Page ID 21666.
Werner implemented its optional Payment Plan for student drivers in 2003, prior to making it available to eligible experienced drivers. Werner's student drivers apprenticed with trainers and drove under supervision throughout an eight-week program during which they generally were away from home. IRS App. Comm., ECF No. 320–3, Page ID 21674. At the conclusion of their initial two-day orientation, student drivers elected...
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