Under California Labor Code Section 2802, employers must reimburse employees for all necessary expenses incurred in performing their job duties, including vehicle and travel costs for field workers.
The Basic Rule
Labor Code 2802: "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties."
What Must Be Reimbursed
Vehicle Expenses
- Mileage for business travel (IRS rate is safe harbor: 67 cents/mile in 2024)
- Fuel costs if not using mileage rate
- Wear and tear on personal vehicle
- Parking fees for business purposes
- Tolls for business travel
Other Business Expenses
- Cell phone usage for work purposes
- Tools and equipment required for job
- Uniforms (non-generic work clothes)
- Training and certification costs (if required)
- Home office expenses for remote workers
Commute vs. Business Travel
| Type of Travel | Reimbursement Required? |
|---|---|
| Home to regular workplace | No - normal commute |
| Workplace to client site | Yes |
| Home directly to client site | Partial - excess over normal commute |
| Between job sites during day | Yes |
| No fixed workplace (field worker) | Yes - from first to last site |
Example: HVAC Technician
A technician with no regular office reports to customer homes:
- Travel from home to first customer: Not reimbursable (commute)
- Travel between customers: Reimbursable
- Travel from last customer to home: Not reimbursable (commute)
If the first customer is 50 miles away but their normal commute would be 10 miles, they may be entitled to reimbursement for the extra 40 miles.
Reimbursement Methods
Option 1: IRS Mileage Rate
Pay the IRS standard mileage rate (67 cents/mile for 2024). This is a "safe harbor" - it's presumed to cover actual costs.
Option 2: Actual Expenses
Reimburse documented actual costs (gas receipts, maintenance, etc.). More complex to administer.
Option 3: FAVR (Fixed and Variable Rate)
A combination approach that accounts for both fixed costs (insurance, depreciation) and variable costs (gas, maintenance).
Option 4: Car Allowance
A flat monthly payment. Caution: If the allowance doesn't cover actual expenses, you may still owe the difference.
Tracking Requirements
Employees should document:
- Date of travel
- Business purpose
- Starting and ending locations
- Miles driven
Employers should:
- Have a written reimbursement policy
- Process reimbursements timely
- Keep records of payments
Penalties for Non-Compliance
- Back payment of all unreimbursed expenses
- Interest on unpaid amounts
- Waiting time penalties if unreimbursed at termination
- PAGA penalties: $100-$200 per pay period per employee
- Potential class action exposure