Under Labor Code section 2802, employers must indemnify employees for “all necessary expenditures or losses” an employee incurs in direct connection with performing his or her job duties. But employers, employees, and courts have grappled with issues such as what must be reimbursed and at what rates, and whether paying an increased salary or commission satisfies the reimbursement requirement.
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To provide more clarity, the Division of Labor Standards Enforcement (DLSE) has issued proposed regulations. The DLSE’s proposal addresses mileage reimbursement for employee- and employer-owned vehicles, as well as reimbursement for per diem and other travel expenses. Also, the agency takes the position that expenses must be reimbursed based on actual costs or an IRS approved rate, and that simply paying increased compensation to cover employee expenses doesn’t satisfy section 2802. Note, however, that the California Supreme Court is currently reviewing a case that raises the question of whether employers can pay increased compensation in lieu of reimbursement for actual expenses.
We’ll have the full story in an upcoming issue of the California Employer Advisor.
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