Are you paying your employer's costs of doing business?

Posted by Joe Sayas | Sep 08, 2018

(Your rights to reimbursements may be significant)

Q: As part of my work, I travel to clients using my own car and I pay for gas. I also make several business-related calls on my personal cell phone, although since I have an unlimited plan, I do not really incur additional expenses. Should my employer still reimburse me when I use my car and cell phone at work?

A: Under California law, an employer shall reimburse an employee for all necessary expenditures incurred in direct consequence of the discharge of the employee's duties. This is to prevent employers from passing their operating expenses to employees. If your travel expenses and cell phone use were necessary for you to be able to do your job, then you are entitled to reimbursement.

Other expenses reimbursable to employees include:

  1. transportation, mileage, parking, and other travel expenses;
  2. purchasing, laundering or repairing uniforms required by the employer;
  3. purchasing supplies, tools, materials, or equipment;
  4. “supper money” for when an employee is requested to work during the evening;
  5. hotel expenses;
  6. cell phone use related to work
  7. deductions to wages for costs that should have been paid by the employer, such as fuel or insurance

Does an employer have to reimburse an employee for work-related use of a personal cell phone even if the employee did not incur an extra expense because of this use?

Yes, reimbursement is always required. When employees must use their personal cell phones for work-related calls, then they are incurring an expense. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills. To prove employer liability for reimbursement, the employees need only show that they were required to use their personal cell phones to make work-related calls.

Is the employer allowed to fulfill its reimbursement obligation by paying employees increased wages instead of separately reimbursing them for their actual expenses? 

An employer may fulfill its legal reimbursement obligation by paying employees enhanced compensation in the form of increases in base salary or increases in commission rates, or both. However, there must be a means or method to apportion the enhanced compensation to distinguish what amount is being paid for labor performed and what amount is reimbursement for business expenses.

Wages and expense reimbursement are not the same thing. An employee should be vigilant in ensuring that the employer provides some method or formula to identify which of the combined amount is intended as wages or as expense reimbursement. Wages are taxable and subject to deductions. Reimbursements are not, and should be fully paid to the employee.

Workers misclassified as independent contractors are often charged unlawfully for these business expenses. Our law firm helped hundreds of truck drivers misclassified as independent contractors who were charged for the fuel and insurance premiums on the companies' trucks that they were driving. After 3 years of litigation, the federal court favorably ruled that our drivers were employees. The companies eventually agreed to settle the case and pay $11.04 million, and reclassify the drivers as employees. In addition to receiving back wages, drivers now get health insurance and pension benefits from their employers.

About the Author

Joe Sayas

C. JOE SAYAS, JR., Esq. Recognized as one of California's top employment and labor law attorneys by the Daily Journal, C. Joe Sayas, Jr. has devoted his more than 25-year litigation career to protecting workers' and consumer rights. He has fought for employees discriminated due to disability, ra...

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