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 – generally at the rate set by the IRS, which is presently $0.54 per mile.
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 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 actually 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 $0.54 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 $0.54 per mile, something that would be very difficult, if not impossible to do.
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.
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.
If Your Employer Has Failed to Reimburse You Fairly, Contact Our Orange County Office Today
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.