Reimbursement for mobile employees can be tricky and ambiguous for companies across the country. While an employee desires being reimbursed for his or her actual expenses, an employer just as equally desires increased transparency into the reimbursements it is distributing.
California Labor Code Section 2802:
California is a state that has seen this disconnect come into fruition for decades. In general, California has been long known to have some relatively intricate labor laws, the most prominent being California Labor Code Section 2802. In simplest terms, this law states that employees should be reimbursed for each and every expense that they are subjected to throughout the course of doing business. If this law is not closely abided by, employers can potentially be exposed to messy, employee-triggered lawsuits that typically come along with additional fees and interest. To provide a tangible example, in Gattuso v. Harte-Hanks Shoppers, the California Supreme Court ruled that employees should be reimbursed for any and every expense they incur (including automobile expenses).
One thing is essential to note – these types of labor laws are not strictly specific to California. California happens to be the model to follow, as the state has historically been a leader in drafting legislation that ranges from the environment to cybersecurity. As we all know, California is home to the nation’s largest population, and many of its citizens are not afraid to be politically involved.
Other States Beginning to Follow Suit:
Due to the grave consequences that accompany inaccurate or unjustifiable reimbursements for employees, other states in the U.S. have already begun to emulate what’s been implemented in the Golden State.
In Massachusetts, for example, employees must be reimbursed for the excess time and expenses that may occur in the event they report somewhere that’s not considered their typical place of work. Another New England state, New Hampshire, maintains labor code that states employees should be reimbursed for any expenses that are considered outside of their pre-determined expenses (i.e. the expenses that were outlined when they were hired). As we move toward the Midwest, both North and South Dakota have labor language that mirrors that of California.
Other states, such as Louisiana, don’t have specific labor laws that directly correlate to California’s 2802, but they do have certain civil codes that seem to highlight some similarities. Louisiana Civil Code 2298 states that “A person who has been enriched without cause at the expense of another person is bound to compensate that person…The amount of compensation due is measured by the extent to which one has been enriched or the other has been impoverished, whichever is less”. In this scenario, as it relates to reimbursement, the employer could be the enriched, and the employee could be the impoverished.
As it turns out, scholars have been connecting the dots between California 2802 and labor laws in other states for quite some time now – and for good reason.
The Bottom Line:
Inaccurate or unjustifiable reimbursement for your mobile workers can land your company into danger, most often in the form of costly lawsuits (some of which can reach close to seven figures). In order to mitigate such risk, companies should look to fair, accurate, and defensible vehicle programs that will be beneficial in the long run.
Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for, tax, legal, or accounting advice. Motus does not provide tax, legal, or accounting advice. For any such advice, you should consult your own advisors.