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How Does California Mileage Reimbursement Work?

In California, employers must to provide compensation to workers who use their personal automobiles for business-related activities. There are 4 ways to determine the refund:

  • lump-sum payments
  • reimbursement based on actual mileage
  • actual expenditure reimbursement
  • combination of fixed and variable rate reimbursement

No matter the method, employees are eligible to full payment.

What California Law Governs Mileage Reimbursement?

According to California employment law, all employers inside the state must reimburse employees for any out-of-pocket business expenses. This comprises the costs related to utilizing the employee’s personal vehicle for work-related reasons in addition to other related expenses.

Employers must reimburse employees for all essential costs or losses incurred in the following:

  • direct result of the person performing their tasks
  • obeying instructions from the employer by the employee

Unless the employee knew they were unlawful while performing them, the employee is eligible to reimbursement even though the employer’s instructions were against the law.

These compensations cover the expenses incurred when an employee uses their own car for work. However, the cost of gas for the car is not always the only part of these costs. They also consist of:

  • wear and tear causing a car to depreciate
  • costs of upkeep and repairs
  • registration fees for vehicles
  • auto insurance

Reimbursements are not need to be made in addition to an employee’s pay or other compensation under California Labor Code 2802(a)LAB.  However, there must be a way to divide up and identify this increased pay as reimbursement.

What are the Various Methods for Determining Reimbursement?

According to California law, there are 4 possible ways to determine how much an employee must pay for a car used for work-related purposes:

  • a regular lump sum payment or “gas stipend” that covers all expenses associated with operating the vehicle
  • compensation based on the distance traveled
  • a payment based on the worker’s real out-of-pocket costs
  • a hybrid computation that employs variable rates for some costs, like fuel, and fixed rates for others, like insurance.

When utilizing any of these strategies, the employer is only responsible for covering their actual, necessary costs. It’s possible that unnecessary car costs won’t be paid for.

Which reimbursement policy will be applied is a decision that the employer and employee must make together. Therefore, the parties must concur on the mileage reimbursement rate if one is to be used. Usually, the job contract or employee handbook will outline this.

Any agreement, however, that denies an employee their entire entitlement to reimbursement for business-related automobile expenses is void. In fact, employees must have the chance to contest the appropriateness of the reimbursement under such an agreement.

Gas Stipends or Lump-Sum Payments

In California, employers are able to pay employees a single fixed sum to cover vehicle-related expenses. Likewise known as:

  • “gas stipend”
  • “allowance for cars”
  • “daily fee”

This is a regular payment, often sent each month, of a specific amount that covers the employee’s expenses.

Employees who use their own automobiles to travel the same routes every day or week typically adopt the lump-sum technique. When the amount being put in use is constant, lump-sum payments could be desirable since they require fewer paperwork from both parties.

However, a flat sum payment might not be sufficient due to shifting gas prices. Undercompensated workers in these circumstances have the right to contest the amount and demand full compensation.

What if My Company isn’t Covering All of My Personal Automobile Costs?

Employers who underpay their workers for using their automobiles for personal purposes have the right to contest the amount of the reimbursement. Therefore, workers can demonstrate that the payment has been insufficient by providing documentation of their real costs. Workers may bring a wage and hour lawsuit if the employer does not make good on the discrepancy. Lastly, employees may bring a class-action lawsuit if their employer consistently refuses or fails to pay for their travel expenses.

Glendale Personal Injury Lawyer

If you need legal assistance with mileage reimbursement contact our office today for a consultation. Please feel free to give our office a call at 310.943.1171.

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