Expense Reimbursement

Expense Reimbursement in California

As a California employee, you have an explicit right to be reimbursed for any expenses or losses incurred as a direct result of your employment. And while you would expect that expense reimbursements would be straightforward, they are often a really sticky topic for California employees.

If your employer has denied you reimbursement for any work related expenses including those listed below, you may be entitled to reimbursement:

California Labor Code Section 2802: The Foundation of Expense Reimbursement

California Labor Code Section 2802 is the primary statute governing expense reimbursement. It mandates that employers indemnify employees for “all necessary expenditures or losses” that are incurred “in direct consequence of the discharge of his or her duties” or while complying with the employer’s directives. This provision protects employees from having to absorb out-of-pocket costs related to their work.

Key Elements of Labor Code Section 2802:

1. “Necessary Expenditures or Losses”: The statute requires reimbursement for expenses that are necessary for employees to perform their jobs. What qualifies as a necessary expense is fact-specific and can vary depending on the nature of the job and the employer’s policies. Typical examples include work-related travel, cell phone use, internet charges, office supplies, and vehicle expenses.
2. “Incurred in Direct Consequence of Duty”: The expenses must arise directly from the employee’s job duties or employer requirements. This ensures that personal expenses or costs unrelated to job performance do not need to be reimbursed.
3. Timing of Reimbursement: While Labor Code Section 2802 does not explicitly dictate when reimbursements must be made, the California Labor Commissioner has interpreted the law to mean that reimbursements should be made promptly after the expense is incurred.

Determining the “Reasonable” Amount for Reimbursement

One of the challenges for employers is determining what constitutes a “reasonable” amount for reimbursement. In some cases, such as travel expenses, the cost can be clear and itemized through receipts or mileage logs. However, for cell phone and internet usage or home office expenses, it may not be as straightforward.

California courts have held that employers are required to reimburse a “reasonable” percentage of mixed-use expenses. For instance, if an employee uses a personal cell phone for both work and personal purposes, the employer must reimburse the employee for the portion attributable to work-related use. Employers are advised to establish clear policies on how to calculate reimbursement percentages, ensuring that they are fair and reflective of actual usage.

Penalties for Non-Compliance

Failure to comply with California’s expense reimbursement laws can expose employers to significant legal liability. Employees may file claims for unpaid expenses through the California Division of Labor Standards Enforcement (DLSE) or pursue civil litigation.

Potential Penalties Include:

• Full Reimbursement of Unpaid Expenses: Employees are entitled to recover the full amount of any unreimbursed expenses that are determined to be necessary and incurred in direct consequence of their work duties.
• Interest: Employees may also be entitled to interest on unpaid expenses from the date they were incurred.
• Attorney’s Fees: In cases where an employee successfully recovers unpaid expenses, they may also be awarded attorney’s fees, making the cost of litigation even more burdensome for employers.

Moreover, employers that fail to reimburse employees may face claims under California’s Private Attorneys General Act (PAGA), which allows employees to recover civil penalties on behalf of the state for violations of the Labor Code.

If your employer doesn’t reimburse you for the work-related expenses you have incurred, including the expenses mentioned above, you may be entitled to compensation. Call Dychter Law Offices today to discuss your rights and get the reimbursement you are owed!