What Is the California Expense Reimbursement Law?

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What Is the California Expense Reimbursement Law?

California law requires employers to reimburse workers for “all necessary expenditures or losses incurred by the employee” in the course of the job, as well as for expenses incurred at the employer’s directive. California Labor Code Section 2802 is designed to protect workers from shouldering the costs of expenses incurred during the course of their job.

 Qualifying Expenses

Expense reimbursement is likely to come under additional scrutiny in the coming years due to a recent decision from a California appellate court. California Labor Code Section 2802 outlines employer responsibilities concerning business expense reimbursement. As stated above, an employer must reimburse an employee for “all necessary expenses,” which California law defines as for the actual costs incurred in order to perform their job.

Expense Reimbursement Timing

Employers might be under the impression that they have some discretion over the approval process for expenses. For example, an employer might try to limit reimbursement to only those expenses preapproved by management.

Employer reimbursement policies may require workers to submit expense reports within a certain time frame, but the California Expense Reimbursement Law states that workers must be paid for legitimate business expenses no matter when the employee submitted them and whether or not management has already approved the expenses, according to the Society for Human Resource Management (SHRM).

Denying Reimbursement Requests

SHRM explains that employers risk being sued if a company refuses to reimburse expenses that were not preapproved.

“A less-risky practice would be to provide payment to the employee in order to comply with the employer’s obligation to reimburse for such expenses and then also counsel or discipline the employee for failing to follow company policy,” an employment law expert told SHRM.

Cochran Decision

Cochran v. Schwan’s Home Services is the case that resulted in the courts expounding on the California Expense Reimbursement Law, which called into question which business expenses employers are obligated to cover. While the issue in the Cochran case concerned reimbursement for the use of an employee’s personal cell phone for work purposes, the appellate court found that the question applied on a much broader scale. Employers, according to the court’s decision, would also have to reimburse employees for any personal devices workers need to fulfill the duties of the job, such as laptops, tablets, or tools.

To avoid litigation, the California Law Employment Report recommends that employers “be mindful about reimbursing employees for cell phone use, printing and office supplies (if an employee is required to maintain a home office or use a personal printer for work), and other work-related expenses.”

Required Tools and Equipment

When tools or equipment are needed to perform a job, it’s the employer’s responsibility to provide and maintain these items for all workers, per the Department of Industrial Relations. There are two exceptions to this rule, for all workers except construction workers.

The California Expense Reimbursement Law does not require employers to provide tools to registered apprentices. And employees whose wages are at least twice the minimum wage “may be required to provide and maintain hand tools and equipment customarily required by their trade or craft,” though it’s “limited to hand (as opposed to power) tools and personal equipment, such as tool belts or tool boxes, that are needed by employees to secure these hand tools,” the Labor Center’s report states. Employers are responsible for providing tools and equipment necessary for occupational safety, per Cal-OSHA, a Golden State program charged with protecting the health and safety of workers.

An employer who does not make an effort to understand the complexities of the California Expense Reimbursement Law and to develop policies in line with the labor code could find themselves the subject of a lawsuit.