Employer reimbursement for Mileage and other Business Expenses
The employment attorneys at Eason & Tambornini are regularly asked questions about mileage and/or business expense reimbursement. Additionally, we’re asked whether an employer is responsible for providing employees with tools, vehicles, uniforms, and cell phones.
The primary rule comes from California Labor Code 2802(a):
“[a]n employer shall indemnify [compensate/repay] his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer[.]”
Can an employer limit employee reimbursements?
We occasionally see some employers attempting to force an employee to waive and/or limit their rights to reimbursement. However, California Labor Code 2802 makes any waiver or limit void and unenforceable.
Employers use many tactics to avoid paying for reimbursements. They may make the reimbursement process difficult by requiring extensive documentation in short periods of time. We have seen employers denied reimbursement because their expense report was not submitted in a timely manner. While failing to meet your employer’s demands may be a valid reason to terminate an employee, it is not a valid reason to deny reimbursement. If an employer knows you were incurring work expenses, they are obligated to reimburse you.
Does my employer have to reimburse me for mileage or pay me for use of my own vehicle?
If you are required to use your personal vehicle for your job, your employer is required to compensate you for the use of your vehicle. The most common way to reimburse employees is the mileage method. However, that is not the sole way to compensate an employee for use of their personal vehicle. An employer can use the mileage method, the actual expense method, or even a lump sum method.
The mileage method can be cumbersome for a day-to-day driver because keeping track of miles, reporting, and allocation can be frustrating. However, as long as the rate is comparable to what the Internal Revenue Service allows for mileage, it is generally accepted as a fair reimbursement for the incidentals of car ownership. Here is a link to the Internal Revenue Service’s mileage chart for 2017. https://www.irs.gov/uac/2017-standard-mileage-rates-for-business-and-medical-and-moving-announced
Actual Expense Method
Another method is the actual expense method. Under this theory, the employer reimburses the employee for fuel, repairs, registration, depreciation, insurance, and related matters. Determining the proper amount for each of those categories is difficult and often leads to litigation and dispute. For this reason, it’s often the least favorable for both employees and employers.
Lump Sum Method
The third most common way to reimburse for vehicle expenses is the lump sum method. This is obviously the easiest for the employer and the employee. However, unless the employer reimburses the employee enough to cover all of the actual expenses, the employer is in violation of law.
Does an employer have to reimburse an employee for use of an employee’s tools or equipment?
As a general rule, an employer is required to reimburse an employee for use of all business expenses, including tools and equipment used to perform their job. There are two major exceptions to this requirement.
- If the employee works in a profession that requires hand tools, such as an auto mechanic, and if the employer pays at least double the minimum wage. This exception is generally limited to the hand tools, tool belts, and tool boxes. An employer must still provide an employee with power tools or reimburse the employee if they use their own.
- If the employee works as a barber or hairstylist.
Does an employer have to reimburse an employee for cell phone use?
If an employee is required to use their cell phone for work use, the employer is required to reimburse the employee for a reasonable percentage of the employee’s cell phone bills. An employer doesn’t have to pay the whole bill, nor does an employee have to show increased minutes or plan requirements.
If you have questions about whether an employer is properly reimbursing you for mileage and/or business expenses, please do not hesitate to call one of the employment attorneys at Eason & Tambornini for a free consultation.