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Employee Reimbursement for Business Expenses

by | Dec 21, 2021 | Wage And Hour Law |

California law operates to ensure employers provide employees with the equipment and resources necessary to work and protect employees by preventing employers from passing operating expenses on to employees.  To that end, the Labor Code mandates that California employers reimburse employees for mandatory expenses incurred in performing job duties.  Employers that fail to reimburse employees violate California law, and face exposure for their failure to reimburse under California Labor Code section 2802.

Labor Code § 2802 Reimbursement Claim Elements

To prevail on a failure to reimburse claim, California employees must show:
1. They incurred necessary expenditures;
2. While in the discharge of their job duties;
3. The employer knew or had reason to know of the expenditures; and,
4. The employer did not exercise due diligence towards reimbursement.

Under California Labor Code section 2802, asserting the existence of an expense is insufficient.  Instead, the expenditure must be necessary.  For example, an employee that prints business documents from their home office for convenience, rather than necessity, is not entitled to reimbursement.  The use of their personal printer is not necessary if the employer provides printers at the office.  Thus, the employer has no duty to reimburse for printer-related costs.

Reimbursement is limited to expenses incurred while the employee discharges job duties.  Accordingly, commuting to and from work is not covered by Labor Code section 2802.

The employer must know or have reason to know of the expenditures.  Often, the employer has constructive knowledge of certain expenses, and the employer may still recover under section 2802 despite failing to request reimbursement.  For example, when the employer requires an employee to use their personal vehicle for business, the employer is deemed to have reason to know of the expenditure.  However, not all costs are apparent.  Thus, employees must inform the employer that they are incurring necessary costs while working and request reimbursement.

California Employee Reimbursement Rate

Under California law, reimbursement rates must be reasonable. California Labor Code § 2802(c).  At the same time, the employee must receive full reimbursement for expenses incurred.  Where the expense is supported by a fixed cost, such as a receipt or invoice, there is little room to dispute what constitutes a reasonable reimbursement. Where the requested reimbursement includes expenses whose dollar value may be difficult to ascertain, a dispute may arise over the amount of reimbursement.  Where an employee can show that the reimbursement amount is less than their actual expenses incurred, the employer will be required to make up the difference.  Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554, 569 (2007).  The Gattuso opinion demonstrates that, under certain circumstances, a California employee may have a claim for additional reimbursement, provided they can show that the employer’s reimbursement is not reasonable because it is insufficient.

In lieu of direct reimbursement, California employees may receive enhanced compensation to cover mandatory business expenses.

California Employees May Recover Damages for Employer’s Failure to Reimburse

An employee forced to use personal property for mandatory business-related activities is entitled to reimbursement.  Where the employer fails to provide reimbursement, the employee may recover the amount owed, interest, and attorney fees incurred by the employee enforcing their right to reimbursement.  California Labor Code § 2802.