Unreimbursed Business
Expense Law
“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..."
STATUTE
“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.”
PURPOSE
California has made it clear — employers cannot pass their operating costs to their employees.
APPLICATION
California law only requires reimbursement of “necessary” and “reasonable” expenses incurred as a condition of continued employment. This is a highly fact-driven test that is dependent on many factors, including the employee’s job responsibilities (both express and implied), the employee’s performance expectations while working, and the costs that were actually incurred by the employee.
Reimbursable expenses may include, but are not limited to, the following:
- excels insurance premiums incurred because of mandatory increased coverage
- cell phone bills where cell phones are required by work
- car mileage
- uniform expenses where uniforms are mandatory
- office equipment
- tools
- business-related travel required by employer
- fees for attending mandatory conferences
- training costs
- education costs
- postage
EXCEPTIONS
California has said that employers can give higher salaries in lieu of reimbursing expenses, if there is a reasonable method for determining what part of the increased salary is deemed a reimbursement for business expenses. An increase in pay along, however, is not sufficient, especially without itemizing what portion was intended for reimbursement – as such a method would make it impossible to tell whether the employee was properly being compensated enough for their work-related expenses.