Not So Fast: Employers Must Reimburse for Miles and Other Business Expenses Incurred By Employees
From parachuting into a remote location in Azerbaijan to jumping skyscrapers in Abu Dhabi to drone dodging in the streets of Los Angeles, the latest Fast and Furious movie was captivating from start to end. Who doesn’t want to get lost in the fantasy of driving a Lykan HyperSport, going from 0-60 in less than 3 seconds…assuming you know how to drive stick, which I don’t. Regardless, Dom and his crew made full use of Mr. Nobody’s top-secret government resources to drive sweet rides around the world to their action-packed death. Dom even sacrificed his own beloved Dodge Charger when he drove off the top of a parking lot to effortlessly hang a bag of grenades on Jakande’s (one of the villains’) helicopter for a spectacular explosion. Presumably, the shadow employer properly compensated Dom as the final scene in Furious 7 sees Dom cruising along a scenic route in another Dodge Charger.
Employers Must Reimburse Business Expenses Incurred By Employees
Under California Labor Code section 2802, employers “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…” Section 2802 requires employers to reimburse employees for all out-of-pocket expenses the employee incurs during the performance of his or her job. For example, an employee who uses his/her own personal vehicle when traveling to different jobsites to deliver tools and equipment should receive reimbursement for the mileage incurred, which is in addition to compensating the employee for the commute time between jobsites. Employers should require employees to keep an accurate account of their time when traveling to ensure proper reimbursement and payment of wages.
California employers who require employees to use their own personal vehicles as part of their job duties will be happy to learn that the Internal Revenue Service (IRS) dropped the optional standard mileage rates. As of January 1, 2016, the current standard mileage rates are:
- 54 cents per mile for business miles driven, down from 57.5 cents for 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organizations
The Division of Labor Standards Enforcement (DLSE) accepts use of the IRS standard mileage rate as a reasonable rate of reimbursement for business related vehicle expenses, absent evidence to the contrary. The IRS mileage reimbursement rate covers gas, wear and tear, repairs, oil, insurance and other related costs. If an employee can demonstrate that the mileage reimbursement rate does not cover all of the actual expenses the employee incurred in using his/her own personal vehicle, the employer must pay the difference.
If you require your employees to travel by air for work—to retrieve a chip hidden in a Lykan HyperSport in Abu Dhabi or perhaps a run-of-the-mill conference—employers must reimburse employees for their expenses (i.e., airfare, hotel, food, etc.) and time worked. For hourly employees, work time may include the time starting when employees leave their house until they reach their destination (i.e., the conference), or until they no longer perform work (meaning they are free to sightsee).
Other Reimbursable Expenses
The general rule is that employers should reimburse employees for all expenses that they necessarily expend or lose, directly related to performing their duties or following the employer’s directions. Other reimbursable expenses include:
- Required cell phone use: An employer must reimburse an employee if it requires use of a personal cell phone to make work-related calls, even if the employee has an unlimited date plan and does not incur any extra expense by making business-related phone calls.
- Training-related expenses: The employer must reimburse the employee for the costs of any required training class. The costs of the course is in addition to time spent by the employee in training.
In his goodbye to Brian O’Conner, played by the late Paul Walker, Dom reminisces about how free he feels when driving. For employers, though, if you send an employee on an errand, the employee’s time is not free, regardless of the personal enjoyment the employee derives from driving.