Are You Required to Provide Employee Expense Reimbursement?

Employee expense reimbursement policies should be clearly outlined and should be legally compliant. Employees have a right to be reimbursed for their work-related expenses, including business travel, training, equipment, materials—and sometimes even legal expenses. Most companies typically maintain their own deadlines, rules, special forms, and other procedural requirements that must be followed to request and receive expense reimbursements. In a recent CER webinar, Kevin M. Christensen outlined some guidance for California employers to ensure their employee expense reimbursement policy is in compliance.

Employee Expense Reimbursement: What Are the Employer Obligations?

According to the California Labor Code, 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, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.

The legal terminology may sound complex; Christensen explained that this essentially means, simply: “expenses that an employee incurs doing his or her job need to be reimbursed.” This includes expenses incurred to perform the job, and expenses at the employer’s request or direction.

That said, there is not a lot of case interpretation of employer’s reimbursement obligations. Christensen noted that the Division of Labor Standards Enforcement (DLSE) has “extensive interpretation manuals, policy positions, opinion letter statements regarding various aspects of labor laws, including, some, related to expense reimbursements.” However, “even those don’t have the force of law like a regular regulation might . . . courts have held that the DLSE policies . . . aren’t binding.” In other words, they’re helpful, but they don’t necessarily give a clear answer in all circumstances.

Additionally, employers need to be aware that employees’ rights cannot be waived in this regard. You cannot make such an agreement with employees to waive these rights, so don’t try to avoid your employee expense reimbursement obligation or limit it by agreement, policy or procedure – the agreement will be held void, and may even subject the employer to additional liability. This has not yet been case-tested, however.

Employee Expense Reimbursement: What Are the Consequences of a Violation?

What happens to an employer who fails to meet their employee expense reimbursement obligations?

The first consequence is that the employer can be sued, Christensen advised. He continued: “You can be the subject of an administrative action before the DLSE, and you can be the subject of an order by the DLSE to pay a certain amount of money.” Damages available beyond the actual expense include interest on amounts due and unpaid. Additionally, if the case goes to court, attorneys’ fees would be due.

Employee Expense Reimbursement Best Practices

To avoid these consequences, what are some recommendations for employee expense reimbursement policies? Best practices:

• Implement and enforce written policies regarding employee expense reimbursement. List the types of expenses reimbursed, specify what is needed to submit a reimbursement request, and promptly process requests and issue payments.
• Don’t over-rely on the duty of employees to submit requests. If the employer should know the employee incurred expenses, follow up rather than wait and hope no request will be submitted.
• Notify employees of their right to prove estimates (such as mileage or any other indirect form of reimbursement) were insufficient to cover actual expenses. In other words, if there was an estimated reimbursement that was later found to be less than the actual expense, the employee can show evidence of this and be reimbursed for the difference.
• Err on the side of reimbursing, but impose discipline if necessary when a policy has been violated.
• Provide regular training for HR, payroll, supervisors and employees about reimbursement rights and obligations.

To register for a future webinar, visit CER webinars.

Kevin M. (Casey) Christensen of the Christensen Law Group (CLG) is a trial attorney and business counselor with 18 years’ experience helping clients resolve their disputes. He specializes in employment law, insurance coverage/bad faith, and commercial litigation.