Understanding Employee Expense Reimbursements

Do you have employees? If so, you likely need to provide expense reimbursements. California Labor Code 2802 requires employers to indemnify employees for necessary expenditures and losses incurred in direct consequence of discharge of their duties. Simply put, employers should never pass on their operating costs to employees. Employers know they need to reimburse employees for obvious expenses like work-related travel, but what about less common expenses?

Test Your Skills with These Examples

• Gracie’s supervisor asks her to use her cell phone to take a picture of the refrigerator temperature every morning and send it to the department manager. She does not use her cell phone for any other work related reason and she does not incur any extra expense to her cell phone plan.
  • Employees often times have an unlimited personal cell phone plan, which does not cause them to incur extra costs when using their phone for work. However, a California appellate court ruled that employees in this situation must receive reimbursement for a reasonable percentage of their cell phone bill, even though they do not incur additional charges.
• Andre is an hourly employee that clocks in to work using his cell phone app. There is a time clock onsite where he works but, Andre prefers to use his cell phone.
  • This can be tricky. If Andre is not required to use the app on his phone, his voluntary use may not result in an expense reimbursement requirement. However, a court has not addressed this specific issue. Whether you have provided a reasonable number of time clocks for the number of employees clocking in and whether you “encouraged” or “asked” him to use the app may be relevant, but you should consult counsel about your reimbursement obligations.
• Jill’s business flight is delayed and she is stuck at the airport during lunchtime. She buys herself a meal, including a glass of wine to curb her appetite and pass the time.
  • Jill must be reimbursed for her meal to ensure she does not incur a loss due to work related travel. Employers can set a specific policy with reasonable meal allowance and clarify whether alcohol expenses are covered.

Pay attention to work from home (WFH) arrangements, as they can raise expense reimbursement questions, such as internet and general office set–up. CEA members can access our Sample Remote Worker Policy.

Create and follow your policy on expense reimbursement and train your employees on how to submit their expenses. Specify that employees must have prior approval before incurring an expense, review the policy for submitting expense reports along with proper receipts, and ensure you are providing reimbursements as soon as reasonably possible as per the Labor Code.

Expense reimbursements should not be difficult to manage. If an employee is requesting reimbursement, it’s often justified. Having a clear policy beforehand eliminates ambiguity, reduces financial strain on employees, and ensures compliance. Assistance is only a phone call or email away. Call 1-800-399-5331 or email us at ceainfo@employers.org.