Business Expense Reimbursement in California Labor Law

Instructor: A. Casey Carr-Jones

Casey Carr-Jones holds a Bachelor's degree in English & Psychology. She is currently a PHR-certified Human Resources Consultant.

California employees have a broad right to reimbursement of work-related expenses. This lesson discusses the intricacies of California Labor Law with regard to business expense reimbursement, common expense categories, the obligations of the employer, and the actual practice of the law.

Question of Reimbursement

Senior Office Manager Peter works for a media company in Los Angeles, California. Peter recently took a business trip to another company office. He has kept track of his expenses but is hesitant to ask his boss for reimbursement.

In California, a Labor Law was passed relating to business expense reimbursement. We will review the obligations of the employer, the practicality of following the law, and examples of different expense categories.

CA Law: Obligations of Employer

The goal of this law is to prevent employers from passing their operating costs to employees.

The law says that a company is responsible for employee's necessary expenses that are the result of the employee performing his or her job. The law also states that even if the employee's actions were unlawful, the employee is still eligible for reimbursement if he or she was unaware they were unlawful.

Essentially, this means that the employer has to compensate the employee for any and all expenses related to performing his or her job, even if it was unlawful (the key there is that the employee didn't know it was unlawful). In this law, indemnify means to compensate someone for harm or loss.

The code spends a lot of time reviewing exactly what happens if the employer is found guilty of not reimbursing expenses. All awards will earn interest from the date the employee incurred the expense, and includes reimbursement for legal fees. The employer may also receive an additional citation and civil penalty, issued by the commissioner and paid to the affected employee. Bottom line for employers: avoid unlawful procedures or else the end result may be expensive!

Common Categories of Expenses

There are several categories of expenses. Let's review some common types.

Automobile: Employees with work-related vehicle use may be provided a company car, or may be reimbursed. Reimbursement methods may include a predetermined lump sum for personal vehicle use. Employees could also track the actual expenses of the car, which includes repair and maintenance, fuel, and insurance. The most common method of reimbursement for vehicle use is at the privately owned vehicle (POV) rate set by the Internal Revenue Service (IRS).

Cell Phones: Employees who need to use a personal cell phone for work use must be reimbursed. The employer should pay a reasonable percentage of the bill.

Business-Related Travel: Whether employers reimburse based on actual expenses or use a per-diem model for meals and lodging during business-related travel. Per diem means an allowance or payment made for each day. Employers must also reimburse employees for other incidental expenses when the employee is required to travel away from home on business.

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