How Much Does California Law Require My Employer To Reimburse Me For Driving On The Job?
California law requires your employer to reimburse you for all necessary expenses you incur because of your job. The most common type of on-the-job expense employees have is the cost of using a personal vehicle. Although there are several different ways an employer can go about reimbursing workers for vehicle use, the most common is the mileage reimbursement method, where the employer reimburses a certain amount per mile driven.
What is the Current California Mileage Reimbursement Rate?
The Internal Revenue Service (IRS) sets a per-mile amount that employers must pay employees for use of a private vehicle. The reimbursement rate changes every so often, depending on the “fixed and variable costs of operating an automobile.” As of January 2021, the Internal Revenue Service slightly decreased the required reimbursement rate per mile, from $0.575 cents per mile to $0.56 cents per mile. However, if an employer’s policy sets a higher per-mile reimbursement rate, they may pay the higher amount.
What Is the Law Governing Mileage Reimbursement in California?
Mileage reimbursement in California is governed by California Labor Code Section 2802. This important statute reads as follows:
An employer shall indemnify 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 . . . .
In plain English, Section 2802 simply requires that employers reimburse employees for expenditures and costs the employee must incur to perform his or her job, or that are made because of the employer’s instructions.
Section 2802 covers all expenses employees incur as a necessary consequence of their job, including vehicle expenses, travel expenses, use of cell phones, home Internet service, and attorney fees, just to name a few examples.
What Methods Can Employers Use to Reimburse for Vehicle Expense?
There are three basic methods California employers can use to reimburse employees for personal vehicle use. The California Supreme Court in Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554 considered each of these methods and found all of them to be consistent with Section 2802, so long as they compensate the employee for all the costs incurred in owning and operating the vehicle, including, fuel, maintenance, repairs, insurance, registration, and depreciation.
The Mileage Reimbursement Method
The “mileage reimbursement method” is the most common way employers reimburse employees for personal automobile expenses and requires the employee to track all mileage driven for work. The employee then reports the miles driven to the employer, who then reimburses the employee according to a set per mile rate. As noted above, that rate is typically the one set by the IRS for income tax purposes. The IRS rate is based on national average costs for fuel, maintenance, repair, depreciation and insurance.
Although the IRS mileage reimbursement rate is only an estimate, the California Division of Labor Standards Enforcement (DLSE) has stated in an opinion letter that the IRS rate is presumptively reasonable. This means that if an employer wants to pay less than the current IRS rate, it must be prepared to prove that the employee’s actual costs of operating the vehicle are in fact less. On the other hand, if the employee wants a higher rate, the employee must prove that his or her actual operating costs are higher than the IRS rate.
The upshot is that if your employer uses the mileage reimbursement method and you are being reimbursed anything less than the IRS rate – currently $0.56 per mile – you likely have a valid claim against your employer for violation of Section 2802. To successfully defend itself, the employer would have to prove that your costs are actually less than $0.56 per mile, something that would be very difficult, if not impossible to do.
To learn more about how you can bring a California gas mileage reimbursement claim against your employer, reach out to a dedicated Orange County employment lawyer at the Law Offices of Corbett H. Williams.
The Actual Expense Method
The second method employers can use to reimburse employees for personal vehicle expenses is the “actual expense method,” which involves tracking the exact expenses the employee incurs for his car or truck, including fuel, maintenance, repairs, insurance, registration, and depreciation and then allocating those costs across miles driven for work and for personal reasons. This method is seldom used because, although it is very accurate, it is also very difficult and time consuming to apply.
The Lump Sum Method
The third method employers may use is the “lump sum method.” It involves the payment of a fixed amount for reimbursement of personal vehicle use and doesn’t require the employee to track mileage driven for work. Instead, the employer pays a fixed amount in the form of a per diem, car allowance, or gas stipend. The lump sum method complies with Section 2802 so long as the amount paid is enough to reimburse the employee for the actual costs of operating the vehicle.
The Enhanced Compensation Method
The fourth method an employer can use to reimburse employees for vehicle expenses incurred on the job is to pay an enhanced wage or salary amount to cover the expense. For example, an employer might pay an extra amount per hour to compensate for expenses.
This arrangement is legal in California, but only if certain conditions are met. First, if the additional amount is subject to tax withholding, the after-tax amount must be adequate to cover the employee’s costs. Second, California courts have ruled that for the enhanced compensation amount to count towards expense reimbursement, the employer must communicate in writing how much of the overall compensation is allocated to reimbursement and how that amount is calculated. The communication must be at the time of payment of wages. In other words, the employer must include the calculation in the pay stub or on a separate form provided every time the enhanced wage is paid.
Can Employees Get Reimbursed for Other Job-Related Expenses?
Under California Labor Code Section 2803, employers are also responsible for reimbursing employees for other job-related and travel expenses. Other common reimbursable expenses include:
- Cellular telephone or “smartphone”
- Home Internet expenses;
- Car rental fees;
- Conference registration fees;
- Copy, fax, and printing expenses;
- Currency conversion fees (for foreign travel);
- Hotel and motel costs;
- Hotel Internet access expenses;
- Parking fees;
- Postage expenses;
- Public transportation expenses;
- Taxi or rideshare costs;
- Tips; and
To qualify as a reimbursable expense, an expense must be a direct result of your employment. California law ensures that an employer cannot place the burden of doing business on the employee. If your employer requires that you use a cellular phone, vehicle or home Internet service to perform your work, they must reimburse you for the cost of providing that service.
Often, employers list reimbursable expenses in an employee handbook or in some other internal document. Regardless, if the expense is not listed in the employer’s handbook or policy, reimbursement is still legally required if it is “necessary” to perform the job.
No Requirement to Reimburse for Commuting Miles
Employers are not required to pay for all mileage associated with workers’ jobs. Most importantly, there is no obligation for an employer to reimburse for mileage driven commuting to or from work. The same goes for other transportation costs incurred in commuting to and from home and work. Mileage reimbursement is one of many ways employers can fail to fairly compensate employees. Read about some of the other common wage and hour laws employers violate.
California Mileage Reimbursement Class-Action Lawsuits
Often, when an employee realizes that their employer is not fairly compensating them for job-related travel expenses, such as mileage reimbursement, other employees are also affected. In these situations, a class-action lawsuit may be the best way to hold the employer accountable.
Class-action lawsuits offer many benefits over individual lawsuits. Most notably, employees can save on the costs associated with bringing their claim. In addition, employees generally enjoy increased bargaining power when bringing a California class action employment lawsuit, because the potential cost to the employer, if they lose, can be significant.
At the Law Offices of Corbett H. Williams, we represent individual employees as well as large groups of employees in California mileage reimbursement lawsuits.
Contact an Orange County Employment Lawyer for Immediate Assistance
If you have questions about California mileage reimbursement laws or you believe that your employer has withheld reimbursement for qualifying expenses, you may be entitled to compensation. Our attorneys command an in-depth understanding of California gas reimbursement laws and keep up to date with all relevant changes to best represent our clients.
The Orange County based Law Offices of Corbett H. Williams is an elite law firm that represents employees in discrimination, harassment, retaliation, wrongful termination, wage & hour, and other employment matters. Strict time limits may apply to your claim, so you shouldn’t wait. Contact us today at 949-679-9909 or use the contact form at the bottom of this page, and we will respond promptly.