When it comes to workplace compensation, one major area that often raises questions is the reimbursement of mileage. This is especially true for companies whose employees are frequently on the road for work-related purposes.
While many employers recognize the importance of reimbursing employees for travel expenses, federal law does not mandate reimbursement for mileage.
Some states have laws requiring employers to pay for necessary business expenses, including mileage. If you’re wondering what states require mileage reimbursement, this article is for you.
We will examine specific requirements in three major states: California, Illinois, and Massachusetts. We’ll also look at how the best mileage tracking apps like Timeero can make compliance easier, ensure employees are paid fairly, and streamline operations for your business.
Which U.S. States Mandate Employers to Reimburse Employees for Mileage Expenses?
Mileage reimbursement is a crucial aspect of employment. Whether it's sales reps meeting clients, healthcare professionals attending to patients, or any other job involving travel, the cost of mileage adds up quickly.
For employers, it is not only a legal obligation to ensure that their employees are reimbursed for reasonable travel expenses. Employees rely on reimbursement accuracy to reduce the financial burden associated with their work-related travel.
Understanding specific state laws is an important part of navigating the complex costs of employment. So, what states require mileage reimbursement? Only three states have this requirement - California, Illinois, and Massachusetts.
Let’s take a closer look at the specific rules for each state.
California
In the state of California, employees who use their personal cars for work are entitled to full compensation. Employers should reimburse their employees for "all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties." This is according to the California Labor Code section 2802.
Should an employer fail to do this, there are repercussions. They can be sued for wages and hours. The law defines "all reasonable costs" as "necessary expenditures or losses." It specifies, for instance, that if an employee needs to enforce their rights, these expenses may include legal fees.
Here is a list of some of the most typical travel categories that are eligible for reimbursement:
Acquiring office supplies
Drives to financial institutions to complete tasks related to their job
Travel for customer or client meetings
Visits to a contract work site
Delivering services at home (home healthcare, for example)
Additional errands associated with the business
There are four recognized methods for calculating vehicle expenses incurred by an employee while working if your company is located in California. The California Supreme Court determined in Gattuso v. Harte-Hanks Shoppers that they were consistent with Labor Code 2802. They include:
Reimbursing Business Mileage
By using this method, employees will be reimbursed at the mileage rate that the company uses, but they will essentially have to record all mileage related to work.
Businesses usually calculate their vehicle expenses using the IRS standard mileage rate. This reimbursement option is preferred because it protects both the employer and the employee.
Using Actual Business-Related Expenses
Employers who use this approach must pay back their staff members for the actual costs they spend. Employees must maintain a detailed report of all associated expenses when using their own cars for work-related purposes.
This method takes the most time despite being the most accurate. The employee has to spend a lot of time keeping the necessary records. However, with a mileage tracking app like Timeero, tracking the exact mileage covered becomes easy-peasy.
The app records mileage in real-time as the employee drives from one location to the next. As an employer, you can then access this information in timesheets and reports.
Making Lump-Sum Payments
This method comes down to employers giving workers a set amount to cover their car use expenses. Usually, the lump sum payment is paid monthly. Employees don't need to record miles driven when using this method, as they receive a set car allowance.
Employers in California should exercise caution when determining the amount of reimbursement. The employee must receive full compensation for the actual cost associated with the vehicle for business use. If not, the employer might violate state laws.
Using the FAVR Method (Fixed and Variable Rate Reimbursement)
The costs of using a personal vehicle for work purposes are divided into fixed and variable expenses under this model. Insurance rates are fixed costs, whereas gas prices are variable costs.
The accuracy in reflecting real prices is the FAVR Method’s main advantage. In addition, local prices are used to determine compensation for gas prices rather than relying on national or state averages.
The law explains that the employer is responsible for compensating the employees for “all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer.”
This implies that workers should be paid back for vehicle-related costs that mainly benefit the employer. Employers are not liable for costs resulting from:
normal wear and tear
employee negligence
theft unless it was caused by the employer's negligence
Additionally, in the event that an employee ignores a written reimbursement policy, they will not be eligible for compensation. If the employer fails to follow its reimbursement policy, permits the worker to incur the expense, or both, the costs become payable.
Our customizable mileage reimbursement policy template is available for your company to use to protect your interests and those of your employees. An effective policy should cover the following:
General principles of mileage reimbursement, including the definition of what is considered reimbursable business travel when employees use their own vehicles
Examples of reimbursable mileage costs.
Ways in which employees should track their mileage.
How compensation will be calculated.
The process workers should follow to file mileage reimbursement claims, including necessary records or documentation.
To be eligible for reimbursement, employees are required by law to give themselves at least thirty calendar days to provide supporting documentation. If documentation is not available, they can sign a statement explaining why the support is missing, nonexistent, or lost.
Employers are expected to pay employees or set up a reasonable amount of compensation. Failure to comply with reimbursement requirements may result in legal action, including possible lawsuits and penalties.
Massachusetts
Massachusetts is the third state that has laws governing mileage reimbursement. The Massachusetts regulation 454 CMR 27.04(4)(b) mandates that employers compensate workers for their incurred mileage.
According to this law, "An employee required or directed to travel from one place to another after the beginning of or before the close of the work day shall be compensated for all travel time and shall be reimbursed for all transportation expenses.”
The primary legal basis for employee compensation - including reimbursement for mileage and travel expenses - is the Massachusetts Wage Code. This Code requires employers to reimburse employees for any expenses incurred while performing their job duties in a proper manner.
Regular commuting from home is not considered paid work time. Check out our article on commuting mileage reimbursement to understand the IRS rules on this topic.
A worker who operates from a fixed location on a regular basis and is asked to report to a place other than their usual work site should be compensated for related transportation costs. They should also be paid for any additional travel time beyond their normal commute from home to work.
Employers who fail to reimburse employees for expenses, including mileage, are in breach of the Act. The Massachusetts minimum wage law provides penalties for such violations, including three fines for unpaid expenses and mandatory attorney fees.
It is important that employers fulfill their obligations by providing adequate compensation for business travel expenses. Employees also need to be aware of their rights and take necessary action if they are not receiving reimbursement in full.
This is very important for people who drive a lot during their workday for business-related reasons, like salespeople, visiting nurses, and delivery staff.
How Should Employers Reimburse for Mileage?
Employers must establish clear and fair procedures for compensating employees for mileage in accordance with state law. They can create a policy that reflects all the relevant costs, documentation requirements, and how employees should track mileage.
Many employers choose to reimburse mileage based on the standard mileage rate set by the Internal Revenue Service (IRS). This rate is a fixed amount per mile driven for business purposes and is set at 67 cents per mile in 2024. It takes into account both variable and fixed costs like fuel and depreciation.
Owners of businesses can use this rate for convenience, and employees can calculate their amount owed by multiplying the number of business miles generated by the IRS value. This method provides a consistent and fair method for employee mileage reimbursement.
Please note that your company doesn’t have to use the IRS rate. You can set your own mileage reimbursement rate based on actual expenses.
How Does Timeero Simplify Mileage Reimbursement?
For many businesses, compensating for mileage comes with the stress of tedious paperwork and manual calculations, which are often prone to numerous errors. As a business owner who reimburses for mileage in particular, precision is essential to guarantee you can continue making a profit.
You need to ensure that your staff members aren't inflating their mileage, which can lead to overbilling. Odometer readings aren't always reliable, and the route taken can change how many miles are recorded in the mileage log.
If you’re still using this method, use our free mileage log template to make sure you don’t miss any details. Paper systems are also outdated and become problematic when you try to process payroll.
Employees and employers need efficient mileage tracking tools to ensure compliance with mileage reimbursement laws. Implementing a reliable mileage tracking app, such as Timeero, can simplify the process.
This software allows employees to accurately track mileage for work. It makes it easier for employers to calculate and reimburse expenses as per state regulations.
Real-Time GPS and Mileage Tracking
With Timeero, you can monitor your staff and hold them accountable for the mileage they log, relieving you of this burden. If you have some employees in the office and others out in the field, you can allow mileage tracking for those on the move.
You can enable mileage tracking for individual employees.
The app begins to track mileage when the movement speed surpasses 4.4 miles per hour. You can also customize this by setting your preferred speed threshold in your account. This makes sure that walking or sitting in traffic time is not recorded for mileage calculations.
Timeero allows you to choose what speed counts as mileage.
The app records the employee's GPS location and timestamps for every 150 feet of movement. Even in places with spotty network coverage, mileage tracking is guaranteed by Timeero's offline mode. This feature ensures that every business trip is recorded no matter where the employee is.
The tracker stops tracking when an employee clocks out for a break or at the end of the workday, protecting their privacy and only recording the information related to their work hours.
Mileage tracking on Timeero.
By using the Who's Working page, you can monitor the activities of your team members. You can view each employee's current location and the duration of their clock-in.
Timeero’s Who’s Working dashboard.
You Can View Breadcrumbs
The Timeero Breadcrumb feature allows you to track the movements of employees throughout the day as well. You can see the speed and timestamp at any given point by hovering over each breadcrumb, which functions as a location marker. With the help of visual representation, employers can follow the worker's exact route.
Each breadcrumb has a timestamp and speed.
Adding Extra Expenses
Companies can manage every facet of mileage reimbursement with Timeero since it allows them to track toll expenses independently.
They can make sure the details of their toll expenses are recorded and handled because employees can add a note or a picture of the receipt to their timesheet. If an employee, for example, has to pay a working fee, they can add a note stating this on their timesheet, and the admin will be able to view it.
Employees can attach photos and add notes.
Mileage Charging
Once you track mileage, the next step is calculating costs to reimburse employees for their expenses.
You can configure a per-mile rate in Timeero's account settings, and it gives you the total amount. This eliminates the need for additional mileage calculations.
Even better, you can customize this to the precise location of your business by choosing the local currency. This saves you time and prevents human errors, as you don’t have to do the calculations manually after every trip.
You can add mileage cost per mile on Timeero.
Reimbursing Mileage
Once you have the total mileage cost, you can use Timeero to automate employee mileage reimbursement. Processing payments will no longer require the time-consuming, repetitive tasks they once did.
The software streamlines payroll calculations by integrating several payroll and invoicing platforms. These include Gusto, Rippling, Zapier, Vieventium, Paychex, Xero, ADP, and Paylocity.
Read our article on Gusto mileage reimbursement to learn how to use this software to efficiently pay back employees.
Timeero integrations.
Historical Records
If there is ever a dispute regarding mileage, Timeero ensures you have all the necessary records. Every timesheet contains details on the employee's mileage covered during a shift.
You can see mileage on each timesheet.
It also includes the total number of hours worked, clock-in and clock-out times, breaks taken, and overtime, if any. You can also access mileage tracking reports and other important reports for your business.
This comes in handy when calculating tax deductions/ tax cuts or proving that you are IRS-compliant. All this mileage tracking data is available to you for four years, so you can use it whenever you want for reference.
Mileage reports on Timeero.
Simplify Mileage Reimbursement With Timeero
Once you are aware of what states require mileage reimbursement, the next step is to meet these obligations. Employers in these states should familiarize themselves with the relevant labor laws. They should also have open lines of communication with their employees and implement best practices to avoid legal issues.
Timeero is an invaluable asset because of its automated tracking. It not only makes reimbursement procedures easier but also ensures that everything complies with the law. The best way for employers to save costs and improve employee satisfaction is by leveraging Timeero's mileage-tracking features.
FAQ
Which States Have Laws Mandating Employer Mileage Reimbursement?
California, Illinois, and Massachusetts have laws that say employers must pay back employees for work-related travel expenses, like mileage. In simpler terms, if you use your car for your job in these states, your employer has to give you money to cover the incurred cost. Each state has its own mileage reimbursement rules, so employers and employees need to know and follow them.
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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