Yassine Baouch, et al. v. Werner Enterprises, Inc., dba Werner Trucking, et al.

The Fair Labor Standards Act (“FLSA”) and the IRS regulations distinguish wages paid to an employee from reimbursement for employer-related expenses. The respondent trucking companies paid certain drivers what the companies labeled “earnings” of between $1.86 and $12.57 a day, plus an additional $41 a day labeled “per diem.” For tax purposes, respondents sought to treat the per diem as reimbursement rather than wages, thus substantially reducing their liabilities under the Internal Revenue Code. An IRS Examiner concluded that the per diem payments were recharacterized wages, and thus subject to various federal taxes. On appeal, however, the IRS Appeals Commission sustained respondents’ contention that under the IRS regulations the per diem payments constituted reimbursement, not wages. In the instant case, drivers sued the trucking companies under the FLSA, contending that the per diem constituted reimbursement, not wages, and that the small amount denoted “earnings” was less than the federal minimum wage of $7.25 an hour. The court of appeals held that the per diem constituted wages, not reimbursement, under the FLSA. The court of appeals’ interpretation of the FLSA conflicts with the interpretation of that statute by other courts of appeals. The Question Presented is: Under what circumstances do per diem payments to an employee constitute wages, rather than reimbursement, under section 207(e)(2) of the FLSA?