California Expense Reimbursement

Quick Summary

California employees must be reimbursed for their employment related expenses.

Law Review and Frequently Asked Questions

An Employee Cannot Agree to Waive the Right to be Reimbursed

Labor Code Section 2804 precludes any contract or agreement by which any employee agrees to waive the right to be reimbursed for all of their expenses.

When Must Expenses be Paid?

The California Labor Code does not require that owed expenses be paid immediately upon termination, as is the situation for owed wages. Owed expenses for terminated employees should be paid on reasonable time-schedule, which typically is when the expenses would be paid if the employment relationship had continued, such as the next pay day.

Who Must be Paid?

ALL employees are entitled to be reimbursed for their work related expenses.

It does not not matter if the employee is exempt or non-exempt, paid hourly or salary, full-time or part-time, a US citizen or not, management or not. Even the CEO must be reimbursed for their mileage expenses.

Whether an employee is exempt or non-exempt is important for wage and hour issues such as overtime pay and minimum wage calculations. But this does not affect expense reimbursement.

Whether an employee can deduct expenses on their personal taxes is also irrelevant to the employer's obligation to reimburse these costs.

General Rule: Expenses Reimbursed if Respondeat Superior Doctrine Applies

The test for recovery under section 2802 is whether the expense or loss was incurred within the course and scope of employment. In determining whether, for purposes of indemnification, an employee's acts were performed within the course and scope of employment, the courts have looked to the doctrine of respondeat superior. Under that doctrine, an employer is vicariously liable for risks broadly incidental to the enterprise undertaken by the employer--that is, for an employee's conduct that, in the context of the employer's enterprise, is "not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business." Rodgers v. Kemper Constr. Co. (1975) 50 Cal.App.3d 608, 619; accord Mary M. v. City of Los Angeles (1991) 54 Cal.3d 202, 209; Perez v. Van Groningen & Sons, Inc. (1986) 41 Cal.3d 962, 968.

Expenses are Not Reimbursable if Employee Substantially Deviates from their Duties

An employer is not vicariously liable for an employee's conduct if the employee substantially deviates from his course of duty so as to amount to a complete departure. DeMirjian v. Ideal Heating Corp. (1954) 129 Cal.App.2d 758, 766. However, acts that are necessary to the comfort, convenience, health, and welfare of the employee while at work, though personal and not acts of service, do not take the employee outside the scope of his employment. Alma W. v. Oakland Unified School Dist. (1981) 123 Cal.App.3d 133, 139; DeMirjian, supra, 129 Cal.App.2d at p. 765. Moreover, an employee's conduct may fall within the scope of his employment even though the act does not benefit the employer, even though the act is willful or malicious, and even though the act may violate the employer's direct orders or policies. (Mary M. v. City of Los Angeles, supra, at 54 Cal.3d 202, 209)

Sexual Misconduct is Outside Scope of Employment

Sexual misconduct falls outside the course and scope of employment. (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291 [hospital not liable for sexual battery on patient by technician]; Jeffrey E. v. Central Baptist Church (1988) 197 Cal.App.3d 718 [church not liable for child molesting by Sunday school teacher]; Alma W. v. Oakland Unified School Dist., supra, 123 Cal.App.3d 133, 140-142 [school district not liable for rape of student by janitor].) In line with that authority, the California Supreme Court has held that an employer has no obligation to indemnify a sexual harasser, even though the acts occurred during work hours on the employer's premises. (Farmers Ins. Group, supra, 11 Cal.4th 992)

Bank Accounts for Direct Deposit

If an employer requires that an employee open a bank account in order to receive their pay by direct deposit, the employer must pay the employee for any cost involved in opening or operating that bank account. (DLSE Opinion Letter, March 21, 1997)

Lawzilla Cross-Reference: Direct Deposit

Insurance

Costs of insurance required by an employer are recoverable under the provisions of Section 2802. (DLSE Opinon Letter, February 22, 1993)

Hand Tools and Equipment

IWC Orders allow an employer to require that employees furnish "hand tools and equipment" if the hand tools and equipment are "customarily required by the trade or craft". The term "hand tools and equipment" is to be read narrowly and is limited to "hand (as opposed to power) tools and personal equipment, such as tool belts or tool boxes, that are needed by the employee to secure those hand tools. Moreover, such hand tools and equipment must be customarily required in a recognized trade or craft."

Training and Education Expenses

Costs which are incurred in training leading to licensure pursuant to a statute (real estate, etc.) are not, usually, the responsibility of the employer. (DLSE Opinion Letter, November 17, 1994)

The test is whether the license is required by statute, or the employer. If required by statute, then the expense is not reimbursable. For example, if the law requires a license to sell real estate, then that is an expense to be borne by the employee. It does not matter if the job position is to sell real estate and thus requires a license. On the other hand, if the employer requires that an employee obtain a license, but the license it not required by law, then the employer must pay for this expense.

Attorney's Fees are Recoverable to Enforce the Employee's Rights

Labor Code Section 2802(c) requires the employer to pay the employee's attorney's fees incurred in enforcing the right to be reimbursed for expenses.

Related Topic

Clothing - If a business requires that a uniform be worn, the business must pay for the purchase and maintenance of the uniform. Clothing that is standard in an industry and can be worn from job to job, such as for nurses, does not have to be provided by the employer.

Legal Research

California Labor Code Section 2802

(a) 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.

(b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. Interest shall accrue from the date on which the employee incurred the necessary expenditure or loss.

(c) For purposes of this section, the term "necessary expenditures or losses" shall include all reasonable costs, including, but not limited to, attorney's fees incurred by the employee enforcing the rights granted by this section.

California Labor Code Section 2804

Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void, and this article shall not deprive any employee or his personal representative of any right or remedy to which he is entitled under the laws of this State.