If you have to use your personal vehicle for work, you don’t have to let rising gas prices drive you crazy. Labor Code section 2802 requires an employer to reimburse every employee, exempt or not, for any necessary employment expenses.1 For an outside salesperson, that means his employer must reimburse him for the business use of his personal vehicle. But his employer has the right to pick one of three methods of reimbursement: the “actual expense” method, the “mileage reimbursement” method, and the “lump-sum payment” method.2 The employee just better make sure his employer doesn’t commit highway robbery.
The Three Methods of Reimbursement for Employee Vehicle Expenses
The “mileage reimbursement” method is probably the most familiar of the three methods. This method requires an employer to multiply the number of miles an employee has incurred by the IRS’ optional standard mileage rate. Effective January 1, 2016, the IRS rate for a car, van, pickup, or panel truck is 54 cents per mile. But 54 cents is only a national average expenses for fuel, maintenance, repair, depreciation, and insurance. Because an employee’s actual expenses can vary wildly from vehicle to vehicle and state to state, an employer who reimburses an employee at 54 cents per mile might very well be committing “highway robbery.”
The “actual expense” method is the most accurate method of reimbursement. It’s also the least popular because it requires an employee to record the costs of using his vehicle, including gas, oil, mileage, insurance premiums, registration, repairs, and even depreciation, and apportion them between personal and business uses – a cumbersome and, in some cases, impossible task. Moreover, the employer must use his judgment to decide whether those costs are reasonable.3 If the employer guesses wrong, the employee can sue him.4 Consequently, employers are increasingly shying away from this method.
The “lump-sum payment” method is quickly gaining popularity with employers. This method allows an employer to increase an employee’s compensation (base pay, commissions, or both) and/or make certain fixed payments (e.g., cash stipend, gas card, etc.). Of course, the amount the employer pays must be adequate to cover an employee’s work-related vehicle expenses. Given how volatile gas prices alone can be, an employee’s vehicle expenses can change from month to month or pay period to pay period. So if your employer has been paying you the same lump sum for years, the chances are he’s under-reimbursing you.
Can an Employee Rev Up a Lawsuit If His Employer Fails to Reimburse Vehicle Expenses?
Fortunately, an employee doesn’t have to drive an Italian sports car or a gas-guzzling SUV for California law to entitle him to significant compensation from an employer who fails to properly reimburse him for the business use of his personal vehicle. If his employer fails to properly reimburse him, he may rev up a civil action for the amount owing, plus a mandatory award of reasonable costs, including, but not limited to, reasonable attorney’s fees that the employee incurs in enforcing his rights under Section 2802.5 Interest on the judgment will accrue from the date the employee incurred the personal vehicle expenses.6
Moreover, the employee can sue his employer for civil penalties on behalf of himself and other aggrieved current or former employees under the Labor Code Private Attorneys General Act (PAGA). In effect, PAGA deputizes an employee to collect civil penalties for the State of California for the violation of any Labor Code provision.7 In return, the aggrieved employees can claim a “bounty” of 25% of the civil penalties.8 Even worse for employers, a prevailing employee, but not a prevailing employer, can recover a mandatory award of attorney’s fees and litigation expenses.
For a Section 2802 violation, PAGA establishes a civil penalty of $100 per aggrieved employee per pay period for an initial violation and $200 per aggrieved employee per pay period for each subsequent violation.9 That might not sound like much, but suppose an employer fails to reimburse 10 outside salespersons for a year. The employer will owe civil penalties of $2,000 for the initial violation ($100 x 20 workers), but if he has 26 biweekly pay periods, $100,000 for the subsequent violations ($200 x 20 workers x 25 pay periods). So if your employer isn’t properly reimbursing you, start your lawsuit engines.
Lab. Code §2802(a). ↩
Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal.4th 554 (2007). ↩
Grissom v. Vons Companies, Inc., supra, 1 Cal.App.4th 52, 58 (1991). ↩
Lab. Code §2802(a), (c). ↩
Lab. Code §2802(b). ↩
Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348, 387 (2014). ↩
Lab. Code §2699(i). ↩
Lab. Code §2699(f)(2). ↩