It’s important for businesses who employ traveling workers to understand how to reimburse for mileage. Whether you employ salespeople, delivery drivers, or construction workers working at different job sites, miles can add up quickly.
This guide will cover everything you need to know about California mileage reimbursement, including California Labor Code 2802, current mileage rates, and how to calculate reimbursement.
California is one of three states in the U.S. that require employers to reimburse employees for mileage and business related travel expenses.
According to the California Labor Code section 2802, employers should compensate employees for "all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.”
Employers who do not adhere to California reimbursement regulations are subject to legal consequences.
California’s strict labor regulations are designed to protect workers from having to foot the bill for work-related expenses.
For instance, if you send a staff member to pick up supplies, you are required by law to pay them back for the items they purchased as well as the mileage they accrued while driving their personal vehicle.
Below are examples of work-related travel expenses that are eligible for reimbursement:
Besides travel expenses, California Labor Code Section 2802 requires employers to reimburse employees for additional work-related expenses such as:
Employee mileage reimbursement is tax-free for employers in California. However, this rule applies as long as your company’s mileage rate is not more than the current standard mileage rate issued by the IRS. As of 2024, the IRS mileage rate for business related travel is 67 cents per mile..
If your reimbursement rate is less than or equal to the IRS mileage rate, any reimbursement that is issued to employees is fully deductible.
The IRS requires that all mileage claims be substantiated by providing proof that travel was strictly business related. To meet IRS reporting standards, an accurate mileage log of trip details such as, travel date, departure location and destination, total trip mileage, and trip purpose must be kept by drivers.
In the past, trip details were recorded on paper or entered into Excel spreadsheets. Now, more companies are turning to the best mileage-tracking apps to automate their mileage tracking processes.
However, if you prefer to use manual mileage logs, our free mileage log template will help your business meet IRS reporting requirements.
Use our free IRS mileage reimbursement calculator, to quickly and easily calculate IRS approved reimbursement amounts.
California companies can use four methods to determine reimbursement totals. Per the Gattuso v. Harte-Hanks Shoppers case, the California Supreme Court determined that these methods are compliant with Labor Code 2802.
Approved Reimbursement Calculation Methods:
Let’s look at each of the methods in detail to help you determine which option is the best for your business.
The Business Mileage Reimbursement method requires employees to log all work-related mileage that will be compensated by the employer. Employers should reimburse workers at or near the standard IRS mileage rate to avoid legal repercussions.
Cons: This method relies on the accuracy of reported mileage which can be misrepresented by employees who wish to claim a higher deduction.
Check out our guide on employee mileage reimbursement to learn more about complying with IRS requirements.
This calculation method requires employees to record the exact expenses incurred while using their personal vehicles for work-related purposes. These costs may include fuel purchases, vehicle depreciation, and maintenance work. Although this method is the most accurate, it tends to be the most time-consuming for employees.
Cons: Disputes may arise over what expenses are constituted as reasonable and necessary according to California Labor Code 2802 (ex: choice of auto mechanic or grade of fuel purchased)
The lump sum method requires employers to pay their employees a fixed monthly amount in the form of a “gas stipend” or per diem payment, to cover costs associated with using personal vehicles for business purposes. Employees are not required to keep mileage records in order to receive compensation with this method.
Cons: Employers must fully compensate employees for the actual costs associated with operating a vehicle or they may violate state laws. Additionally, gas prices tend to fluctuate which can make the value of lump sum payments inadequate.
Learn more about California’s travel time pay rules in our comprehensive guide.
The FAVR method categorizes work-related vehicle costs as either fixed or variable expenses according to local rates. This method figures local insurance rates and gas prices into employee compensation to reflect actual and current costs.
Note: Any allowance issued under the FAVR method is considered tax-free as long as the company complies with IRS reporting standards.
Cons: This method may be difficult to implement without advice from an accountant or financial consultant.
Timeero accurately tracks mileage for work and provides precise IRS-compliant mileage logs. The app’s robust features make it easy to comply with California's mileage reimbursement requirements.
Let’s look at a few of Timeero’s features that will help your company remain compliant with federal and state reimbursement laws.
Tracking employees throughout their workday while enforcing your company’s mileage policy can be difficult. Timeero tracks employee location and mileage in real-time to help your company produce accurate mileage reports.
Timeero automatically begins tracking employees once they clock in. The app begins tracking mileage once the employee’s speed of movement exceeds 4.47 mph. This ensures that time spent in traffic or walking is not counted toward business mileage.
Timeero continues to record mileage offline when employees are in locations with sporadic network access. The app’s offline tracking feature stores employee time and location records locally until internet connection is restored.
Timeero values employee privacy and only tracks workers’ time and location while they are on the clock. The app can send push notifications to employees in the event they forget to clock out.
Timeero’s Who's Working dashboard displays workers’ locations in real-time. This feature allows you to easily verify the whereabouts of your employees throughout the workday and encourages employee accountability.
Timeero's Segmented Tracking feature provides detailed insights into an employee’s workday. Perfect for drivers who make multiple stops, Segmented Tracking divides the employee’s driving route into individual chunks based on the stops taken.
Workers only need to clock in once at the start of their shift and Segmented Tracking will document travel details such as, trip date, departure location and destination, total miles traveled, driving speed, and job assignments.
Timeero’s "Commuter Mileage" feature simplifies mileage classification for businesses. We cover this more in detail in our article on commuting mileage reimbursement.
Timeero takes into account your employees' commuting distances when you assign job destinations to them. When an employee reaches the commute threshold, the software starts recording business mileage automatically. This guarantees that the mileage reported is solely associated with travel for work-related purposes.
To calculate accurate mileage reimbursement, Timeero lets you set up a per-mile rate in your settings to compute mileage costs.
Once the rate is configured, the software automatically computes the total reimbursement amount.
Timeero allows businesses to track extra charges independently, enabling them to control every aspect of mileage reimbursement. Timeero allows employees to attach notes and receipts to individual timesheets documenting expenses incurred during travel.
For example, if an employee uploaded a receipt for parking fees associated with a client meeting, admins or managers can examine the added notes and approve the claim for reimbursement.
Take a closer look at your employees’ driving routes with Timeero’s Route Replay. This tool pins location markers (breadcrumbs) on a virtual map that can be maximized to display timestamps and driving speed at particular points along an employee’s path.
Together, individual breadcrumbs trace an employee’s driving route that can be replayed to show deviations from assigned routes, increasing employee accountability and mileage accuracy.
Use Timeero’s Electronic Signatures feature to hold your staff accountable. Employees can digitally sign time sheets verifying task completion and hours worked. Clients also have the ability to sign employee timesheets verifying a worker was present at the job site that day.
To encourage accountability, safe driving and time management skills, Timeero’s Suggested Route feature compares the recommended driving route against the actual route taken.
This tool allows you to quickly spot instances where drivers veered away from the shortest driving route and incurred additional mileage expenses.
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A detailed historical record that shows an employee’s complete trip history and mileage details addresses disputes associated with claims of underpayment and prevents lawsuits.
Timeero’s timesheet details can be used to solve payment disputes. Information such as clock in/out times, miles traveled during the shift, breaks, and overtime hours are included on timesheets.
You can also generate specific reports, such as mileage reports, which come in handy when proving that you are compliant with California Labor Code 2802. This information is securely stored for four years in the event you need to access reports and documents.
Timeero easily integrates with several payroll software options. By automating the transfer of mileage data recorded in Timeero to your payroll software, you eliminate the risk of mistakes that lead to inaccurate mileage reimbursements.
Popular payroll integrations include: Zapier, Vieventium, Gusto, Rippling, Paychex, Xero, Paylocity, and ADP.
Complying with California Mileage Reimbursement laws requires effort on your part. Be aware of any updates to legal regulations and incorporate one of the best tracking apps among your workforce to remain compliant.
Timeero’s automatic reimbursement calculator makes compensating employees for work related travel an accurate and painless process.
Employers have the flexibility to choose a reimbursement rate, but most choose to adhere to the standard mileage rates established by the IRS for business-driven miles. This rate is adjusted annually to reflect fluctuations in fuel costs and other operational expenses.
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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