California Mileage Reimbursement: Labor Code 2802 Basics
Natasa Djalovic
Last update on:
September 4, 2023 1:42 AM
Published on:
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’ve dived 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 and easy-to-understand language, so nothing remains unclear.
Let’s start!
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Is an Employer Required to Reimburse for 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 for 2023?
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. Think of it this way - you have to repay your staff for costs that were incurred for business use.
The expense reimbursement includes the costs of using a personal vehicle for work-related 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. They can face a wage and hour lawsuit.
The legislation defines “necessary expenditures or losses” as “all reasonable costs.” For example, it states that these costs can include attorney’s fees if an employee needs to enforce their rights.
What Reimbursement Does Labor Code 2802 Require?
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:
Travel expenses
Training/education costs
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 mileage driven and paid tolls
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 also what constitutes work-related mileage.
To help you get a clear 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
And other business-related errands
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 compensated.
How Can 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 calculate 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 Gattuso v. Harte-Hanks Shoppers.
These four ways boil down to the following:
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
Essentially, this method comes down to employees logging all work-related mileage to be compensated at the company’s mileage rate.
Timeero automatically tracks business mileage and generates IRS-proof logs.
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, too, 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:
Refilling the tank
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 type of gasoline the employee uses, like the premium one, can be challenged. The same goes for the repair shop, where they take their vehicle for maintenance. Although 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.” It comes down to employers paying employees a fixed amount to cover their vehicle use costs. The lump sum payment is most often made monthly. In this scenario, employees don’t have to log the miles driven, so receiving the compensation they’re entitled can require less effort.
This method is frequently chosen as it is relatively simple for both sides. It only required them to agree on the set price. Employees receive a car allowance, a 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 the 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 calculations that comply with CA labor code 2802 and 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 California Mileage Reimbursement Law?
Paper mileage logs and spreadsheets are error-prone and cumbersome methods of tracking mileage, so they belong in the past. They also waste a lot of your employees’ time that could be used for more productive tasks.
To help you stay compliant with California mileage reimbursement law, Timeero has designed mileage tracking software that can accurately track your staff’s mileage, generate IRS-proof mileage logs, and much more.
While employees are on the clock, the Timeero mobile app automatically starts tracking their business mileage whenever it recognizes driving speed.
Besides having real-time insight into your employees’ location, Timeero lets you replay routes they’ve taken during working hours.
See details on employees' routes with Route Replay.
As you can see, the breadcrumb trail of employees’ journey can help you promote employee accountability. If someone takes longer routes or drives too fast, you will know, so you can react on time and prevent any undesirable behavior.
It’s important to know that mileage tracking occurs during business hours only, posing no threat to employee privacy. Moreover, Timeero needs no internet connectivity for mileage tracking, so even if you’re employees are in areas with weak or no signal, no miles will be lost. Data 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. You can get detailed overview of:
Business travels, including the locations, distances, and durations of each trip
Time spent on specific jobs and sites
Segmented Tracking: Entire workday at a glance
Segmented tracking is easy and convenient: your employees just need to log in to their shifts, and the app will take care of tracking and recording all the vital information.
With precise data on employee business mileage, Timeero creates accurate mileage logs containing all the IRS-required data.
Timeero creates accurate and reliable time and mileage logs.
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. And as Timeero integrates with the most common payroll and accounting solutions, you can reimburse your employees’ mileage costs with a few clicks, with no manual entries.
Timeero Integrations
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 your employees, Timeero will show them the shortest route to take.
Timeero can suggest the shortest route to your employees
You can also compare the actual route an employee took with the route that was suggested. The Suggested Route feature world great for promoting employee accountability.
Timeero's Suggested Route Feature
And, as commuter mileage is not tax-deductable, Timeero also offers a Commuter Mileage feature. You can simply enter each employee’s mileage commute distance, and the app will track business mileage after this threshold is reached.
We built our app with our users in mind. Besides tracking mileage, Timeero has other notable functionalities to help you streamline your business processes and cut unnecessary costs:
Time clock
GPS time tracking
Geofencing
Who’s working ( see locations of all your available staff in a single dashboard)
If you’re short on time, you can just watch 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
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 Califonia mileage reimbursement in terms of occupation or salary range. What’s important under this state’s Labor Code 2802 is the nature of the expense incurred - employee expenses must be business incurred.
Are the IRS Rates Required by the 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 Daily Commute to and From Work Included in the Compensation?
No, California’s mileage reimbursement requirement doesn’t cover employees’ daily commutes. According to the law, only the 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.
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