California Mileage Reimbursement: Labor Code 2802 Basics
Last update on:
January 30, 2024 10:18 AM
If you are a business owner or a manager operating in California, then understanding California mileage reimbursement laws is imperative. As with any other law, it can initially seem confusing. But don’t worry - we have you covered!
We dove deep into California Labor Code 2802 and mileage reimbursement to bring you the essential data to stay compliant and treat your teams with the respect they deserve. And we’ve done so in everyday easy-to-understand language, so nothing remains unclear.
Don’t let the California Mileage Reimbursement Law catch you off guard.
Talk to our experts to learn how to stay compliant and save money.
Is An Employer Required To Reimburse Mileage In California?
Yes, employees are entitled to full compensation if they use personal vehicles for business purposes.
Not reimbursing workers properly can be costly for California employers, so let’s take a deeper look at how mileage reimbursement is defined under California law.
What Is The California Mileage Reimbursement Law In 2024?
According to California employment law, employers are required to compensate their workers for any business expense that the worker incurred.
This state’s strict labor laws aim to protect California employees from carrying the burden of work-related expenses.
The reimbursement expense includes the costs of using a personal vehicle for business purposes too. For example, if you’ve sent an employee to pick up supplies for work from a store, you are responsible for reimbursing them for both the supplies purchased and the mileage driven to complete this task.
California Labor Code: Section 2802 On Mileage Reimbursement
So, what is the law on mileage reimbursement for employees in California?
The California Labor Code Section 2802 states that employers must reimburse their workers for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”
There are consequences if an employer fails to do so, namely wage and hour lawsuits.
The legislation defines “necessary expenditures or losses” as “all reasonable costs.” For example, it states that these costs can include attorney fees if an employee needs to enforce their rights.
What Expenses Does Labor Code 2802 Reimburse?
As we’ve seen, themain requirement of this regulation is for theexpense incurred to be both reasonable and necessary for the employee to do their job to be compensated under Labor Code 2802.
More work-related expenses are eligible to be reimbursed under this legal framework:
Fees for taking part in conferences
Costs incurred by using a personal cell phone to perform job duties
Work uniform costs
Driving costs which include mileage reimbursement for the miles driven and toll costs
What are the Requirements For Mileage Reimbursement In California?
Now that we’ve clarified the most common business-related expenses that can be reimbursed, it’s time to look at what also constitutes work-related mileage.
To help you get a clearer picture, we’ll list some of the most prevalent forms of travel that are eligible for reimbursement:
Meetings and visits with clients and customers
Travels to a temporary job site
Providing at-home services (for example, home healthcare)
Buying workplace supplies
Drives to the bank to perform work-related transactions
It’s best to include this information in your mileage reimbursement policy. This way, you’ll help your employees understand what types of travel can be appropriately compensated.
How Do You Calculate Employee Reimbursement Under Labor Code 2802?
If you’re operating a business within the borders of California, there are four approved ways to reimburse the vehicle expenses an employee has incurred while on the job. The California Supreme Court found them to be in line with Labor Code 2802 in the Gattuso v. Harte-Hanks Shoppers case.
The four ways to reimburse vehicle expenses include:
Reimburse business mileage
Reimburse the actual expenses
Lump sum payments
FAVR: fixed and variable rate reimbursement
Let’s explore in more detail how you can comply with California mileage reimbursement regulations.
Mileage Reimbursement Method
This method comes down to employees logging all work-related mileage to be compensated at the company’s mileage rate.
Typically, businesses use the standard mileage rate to calculate vehicle expenses. This is a very popular reimbursement method as it protects both the employer and the employee.
Remember that in most cases, by paying less than the current IRS rate, your company violates section 2802.
To legally pay less than the Internal Revenue Service suggests, you’ll have to prove that the employee’s vehicle costs are less than the established IRS rate, which is a strenuous task.
This is a two-way street. If an employee feels that their expenses are higher than the rate issued by the IRS, they also need to prove that the vehicle operating costs exceed it.
As its name suggests, this calculation method is based on employers reimbursing their workers for actual business-related expenses. It requires employees to record all the exact losses they’ve paid while using their personal vehicles for work-related purposes. These losses include:
Depreciation - changes in the vehicle’s resale value year-over-year
Costs of maintenance
This method is the most accurate of all, but it’s also the most cumbersome. The recordkeeping requirements for it are time-consuming for the employee. Additionally, disputes may arise over the Labor Code 2802’s statement that the expenditures need to be reasonable and necessary.
For example, the grade of gasoline employees use can be challenged. The same goes for the mechanic where they take their vehicle for maintenance. Although it is the most precise method, the actual expense method can cause headaches to both parties involved.
Lump Sum Method
This calculation is also known as a “gas stipend.” Employers will pay their employees a fixed amount to cover their vehicle use costs. The lump sum payment is most often made monthly. With this method, employees don’t have to log the miles driven, so receiving the compensation they’re entitled to requires less effort.
This method is frequently chosen, as it is relatively simple for both parties. It only requires them to agree on the set price. Employees receive a car allowance, gas allowance, or a per diem payment.
Still, California employers need to be careful about the reimbursement amount. It has to fully compensate the employee for the actual costs of operating the vehicle. Otherwise, the employer may find themselves violating state laws.
There is yet another thing you need to be aware of - fluctuating gas prices we are seeing right now can affect the lump sum’s value and make it inadequate. According to the law, workers have the right to question the amount they are being given and demand that it be aligned with the gas market’s prices.
FAVR Method: Fixed and Variable Rate Reimbursement
FAVR reimbursement is a hybrid model that splits the costs of using a personal vehicle for business-related purposes into fixed and variable expenses. Fixed costs include insurance rates, while variable costs encompass gas prices.
The advantage of this calculation lies in its accuracy, as it reflects the actual and current prices. Aside from that, instead of using the state or national averages, gas prices are compensated according to local prices.
When properly implemented, the FAVR model can avoid over- or underpayment to workers. Bear in mind that according to the IRS, these payments need to be made at least quarterly. It’s also important to know that it is non-taxable, just like the IRS mileage rate.
California Mileage Reimbursement: Final Thoughts
California has one of the strictest laws on vehicle reimbursement in the U.S. Now that you’ve read the entire article, it’s clear that you are required to fairly compensate your team for reasonable and necessary costs they’ve incurred while using their vehicles for business-related purposes.
While that part is non-negotiable, you can choose between several calculations that comply with CA Labor Code 2802 and current mileage reimbursement legislation. The most important takeaway when selecting a method is to ensure you’re not under compensating your employees, especially with today’s fluctuating gas (and other vehicle-related) prices.
How Can Timeero Help Me Stay Compliant With The California Mileage Reimbursement Law?
Paper mileage logs and spreadsheets are error-prone and tedious methods of tracking mileage that belong in the past. They also waste a lot of your employees’ time that could be used on more productive tasks.
To help you stay compliant with the California mileage reimbursement law, Timeero has designed mileage tracking software that can accurately track your staff’s mileage and generate IRS-proof mileage logs.
While employees are on the clock, the Timeero mobile app automatically starts tracking their business mileage when it recognizes driving speed.
Besides having real-time insight into your employees’ location, Timeero lets you replay routes they’ve taken during working hours.
As you can see, the breadcrumb trail of an employee’s journey can help you encourage employee accountability. If someone takes longer routes or drives too fast, you will know. This allows you to address the problem quickly and prevent any further undesirable behavior.
It’s important to know that mileage tracking occurs during business hours only, posing no threat to employee privacy. Timeero needs no internet connection for mileage tracking, so even if your employees are in areas with weak or no signal, mileage data will not be lost. Your records will be synced to the server when the app is back online.
Timeero also has a Segmented Tracking featurethat lets you see how your employees spend their working hours. With segmented tracking, you get an overview of business travel details such as location, distance, and the duration of each trip, as well as time spent on specific jobs and sites.
Segmented tracking is easy and convenient to use. All your employees need to do is log in to their shifts and the app will take care of tracking and recording all of the necessary driving details.
Timeero uses accurate mileage information to create logs that meet the requirements of the IRS.
Timeero will record any corrections made to the entries in the History Log. This way, you can always see what was changed and who made the changes, no matter the reason.
With Timeero, you can easily generate mileage reports and get a precise insight into your mileage expenses. Timeero integrates with the most common payroll and accounting solutions, so you can reimburse your employees’ mileage costs with just a few clicks.
But that’s not all Timeero has to offer regarding mileage. Several other mileage-related features may benefit your business.
For example, if you enter the job destination when assigning employees to jobs, Timeero will show them the shortest route to take.
You can also compare the actual route an employee took with the route that was suggested. The Suggested Route feature is a great way to promote employee accountability.
Since commuter mileage is not tax-deductible, Timeero also offers a Commuter Mileage feature. Simply enter each employee’s commute distance, and the app will track business mileage after this threshold is reached.
We built our app with our users in mind. Aside from tracking mileage, Timeero has other notable functionalities to help you streamline your business processes and cut unnecessary costs:
Easy to use time clock
GPS time tracking
Who’s working? ( see locations of all your available staff in a single dashboard)
If you’re short on time, you can book a free demo or start your 14-day free trial today to see what sets Timeero apart from its competitors and why so many businesses are choosing us as their partners.
California Mileage Reimbursement: Frequently Asked Questions
What Is the IRS Mileage Rate for 2024?
The IRS rate for 2024 is 67 cents per business mile driven. Bear in mind that this rate varies depending on medical or moving purposes for active members of the U.S. Armed Forces.
Can Employees Waive Their Rights To These Reimbursements?
No, employees cannot waive their rights to these compensations. Employee contracts can contain a provision that tells them they have no right to reimbursement, but that kind of provision is null, and the court won’t enforce it.
Who Is Eligible For Reimbursement Under California Labor Code 2802?
There are no special requirements regarding California mileage reimbursement in terms of occupation or salary range. What’s important under California Labor Code 2802 is the nature of the expense incurred - employee expenses must be business related .
Are The IRS Rates Required To Be Used By Law?
No, the IRS mileage reimbursement rates are optional. Most businesses use them as a guideline for appropriate compensation for using a personal vehicle for business purposes. However, the IRS rate reflects the national average, so it may not be best suited for the costs incurred in California.
Is The Daily Commute To And From Work Included In Compensation?
No, California’s mileage reimbursement requirement doesn’t cover employees’ daily commutes. According to the law, only business travel that occurs while the employee is on the job has to be compensated.
Are Labor Code 2802 Mileage Reimbursements Taxable As Income?
Reimbursements for business-related expenses can be taxable or tax-deductible depending on several factors. If the following criteria are met, work expense isn’t taxable:
The expense was both ordinary and necessary for the job to be executed
In case the reimbursement was excess, the extra amount was returned to the employer in a reasonable timeframe
The employee verified the cost of the expense within a reasonable timeframe
Note that all of the above-listed conditions need to be met. Otherwise, the reimbursement is considered taxable income.
Natasa is a writer specializing in the IT and software industry with 6+ years of experience in content writing and online marketing. During that period, she wrote more than 1,000 articles and several ebooks. She majored in English language and literature and loves cats, sneakers, and candy. When she's not working, she's probably binge-watching Netflix.