Reimbursement for mobile employees can be tricky and ambiguous for companies across the country. Employee desire reimbursement for his or her actual expenses. Employers desire increased transparency into the reimbursements it is distributing.
California has seen the cycle of this disconnect for decades. This cycle gave rise to the state’s well known, intricate labor laws. The best representation of this? California Labor Code Section 2802. This law states that employers should reimburse employees for each and every expense that they incur throughout the course of doing business. Employers that do not closely abided by this law suffer the consequences. That includes potential exposure 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 essential thing to note? These types of labor laws are not strictly specific to California. The state is home to the nation’s largest population, and many of its citizens are not afraid of political involvement. Historically, California has been a leader in drafting legislation that ranges from the environment to cybersecurity. For these reasons, California is a model other states follow.
Grave consequences accompany inaccurate or unjustifiable reimbursements for employees. For that reason, other states in the U.S. have already begun to follow California’s lead.
In Massachusetts, employers must reimburse employees for the excess time and expenses that may occur in the event they report somewhere that’s not considered their typical place of work. New Hampshire maintains labor code that states employers should reimburse employees for any expenses that are considered outside of their pre-determined expenses. In 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. Still, 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…[regulation measures] the amount of compensation due… by the extent to which one has been enriched or the other has been impoverished, whichever is less”. As this scenario relates to reimbursement, the employer could be the enriched, and the employee impoverished.
Scholars have been connecting the dots between California 2802 and labor laws in other states for quite some time now – and for good reason.
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: Motus prepared this material for informational purposes only. Motus does 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.