HR Management & Compliance

Wage and Hour: California High Court Backs Employer on Expense Reimbursement

In an important new ruling, the California Supreme Court has approved an employer’s practice of paying increased salaries and commissions to cover employees’ mileage expenses. At issue was Labor Code Section 2802, which requires employers to indemnify employees for necessary expenditures they incur as a result of the job. The employees here had argued that Section 2802 required their employer to reimburse them for their actual mileage expenses or at the IRS mileage rate.

The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.

The high court’s decision, which spells good news for California employers, means that to comply with Section 2802 employers now have several options. They can choose to: 1) reimburse employees for their actual business expenditures or pay a reasonable per mile rate (the IRS mileage rate is considered reasonable); or 2) pay increased compensation to cover reimbursable expenses, so long as there’s a means for apportioning the boosted compensation to determine and distinguish between the amount that’s being paid for labor performed and the amount that is being paid as reimbursement for business expenses.

We’ll have more on this case in an upcoming issue of the California Employer Advisor.

Additional Resources:

Gattuso v. Harte-Hanks Shoppers, Inc., Calif. Supreme Court No. S139555, 2007

More articles on Payment of Wages