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Under the California Labor Code, employers are required to reimburse employees for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” This means if an employee incurs expenses in carrying out his or her duties or by following the instructions of his or her employer, that employee is entitled to reimbursement for those expenses. This includes mileage for auto expenses, among other types of expenses. This obligation also cannot be waived by the employee. If an employer fails to reimburse an employee for his or her business expenses, the employer may be held liable under California law for the expenses incurred, as well as interest and attorneys’ fees. Accordingly, it is important to consult with a San Diego employment attorney to ensure that there is compliance with all relevant laws.
Reimbursement for Business Expenses
Employers are required to reimburse their employees for “all reasonable costs” associated with the business. Employees may be entitled to reimbursement for
- Business supplies
- Mileage and other automobile expenses
- Airfare, meal and lodging expenses associated with business travel
- Uniforms required by the employer
- Cell phone usage for work-related phone calls
- Professional development seminars required by the employer
- Other legitimate business expenses.
Methods of Reimbursement
The California Supreme Court has held that employers may reimburse their employees in one of two ways:
- The actual expense method
- The lump sum method.
The actual expense method allows employers to require employees to calculate all expenses incurred and then pay the employee that exact amount. Alternatively, employers may reimburse employees by paying a fixed amount for expenses by increasing their salaries or commission rates or by remitting a separate check each month; such agreements should be in writing. Because lump sum payments are not as accurate as actual expense reimbursements, employees may challenge reimbursement payments made in a lump sum.
A third method that may be used when reimbursing for certain travel expenses is the mileage reimbursement method, which provides for an agreed payment amount to cover the cost of fuel, maintenance, repair, depreciation and insurance expenses. Typically, the IRS reimbursement rate is used.
Avoidance of Reimbursement Requirements by Misclassification of Employees
One way employers often avoid the business expense reimbursement requirement is by misclassifying employees as independent contractors. This is because, unlike employees, independent contractors are considered to be self-employed and, therefore, are not required to be reimbursed for business expenses. Improperly classifying an employee as an independent contractor is a serious violation of federal and state tax laws and can subject an employer to significant damages and penalties.
To learn more about expense reimbursement claims, you should retain the assistance of an experienced San Diego labor and employment lawyer. Contact a San Diego employment attorney at our firm today for further assistance.
