Employers have a duty in California, under Labor Code section 2802, to reimburse employees for losses and reasonable expenses incurred in the performance of their job duties. This makes sense, as an employer should not be able to pass along to employees the expenses of operating their business. The Industrial Wage Commission (IWC) wage orders in California also call for the reimbursement of specific expenses such as tools, equipment, and uniforms.
NECESSARY EXPENSES AND LOSSES
In California, the duty of employers to reimburse (also called “indemnify”) their employees extends to all necessary expenditures and losses incurred in the performance of their job duties. In other words, the employer should be paying for all expenses that are reasonably necessary to carry out the things that the employer expects the employee to do. This includes things that the employer explicitly tells its employees to purchase, but it also includes all expenses and losses that a reasonable employee would pay for, given the duties of their job – even if the expense is not pre-authorized by the employer.
The same goes for losses: so long as the employee was acting reasonably in the incursion of losses on the job – such as the employee’s own tools stolen from a worksite – their employer must reimburse them that loss.
If the employer requires its employees to travel for work (other than to and from the principle work site(s)), it must also must reimburse the employee for the costs of travel. This includes mileage, which the employer can reimburse employees at the mileage rate set by the Internal Revenue Service (IRS). That rate is presumed to cover the costs of vehicle usage (wear and tear). This rate changes from year to year and the update rate can be found with an internet search of “IRS Mileage Rate.”
The employer may also reimburse for mileage by paying a lump sum periodically, so long as this sum is sufficient to fully reimburse the employee for their mileage use.
If the employee uses a company-provided vehicle, the employer must reimburse for the reasonable expense of fueling, maintaining, servicing and repairing the vehicle.
FORMS OF REIMBURSEMENT
The employer may either pay reimbursements with a separate check, or with an increase in the base pay paid to the employee. If the employer opts to pay reimbursements through a base pay reimbursement, the employer must clearly identify the portion of the payment that is the expense reimbursement, and because that will increase the payroll tax liability of the employee, must also reimburse separately for the increased tax liability.
Reimbursement for Legal Expenses When an employee is sued for their conduct that they performed in the course and scope of their employment, the employer must both: (1) reimburse the employee for legal fees and costs related to defending the lawsuit; and
(2) if the employee loses the lawsuit, reimburse them for the amount of the judgment. An employer need not reimburse for an employee’s acts of willful misconduct that do not fall into the “course and scope” of employment. An example of this is sexual harassment, which the law says, an employer should generally not be expected to pay for.
If your employer refuses to reimburse you for losses and/or expenses that you have reasonably incurred on the job, contact the wage and hour attorneys at the Law Offices of Kyle Todd at (323) 208-9171. Ask about our free initial case consultation.