Here is a scenario that you may be familiar with: Your boss asks you to drive across town to pick up a package that is needed for the office. He doesn't provide you with a company vehicle, so you would have to use your own car. You are afraid to refuse because it might antagonize your boss, but at the same time, you are wary of spending the gas money needed to make the trip - especially since your boss doesn't pay much, to begin with.
If you are an employee in California, the good news is that there is a specific law in the Labor Code to protect you in these situations. California law requires that your employer compensate and reimburse you for all necessary business expenses within the scope of your employment.
California Labor Code section 2802(a) states:
"An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."
Section 2802 is designed to prevent employers from passing their operating expenses on to their employees. For example, if an employer requires an employee to travel on company business, the employer must reimburse the employee for the cost of that travel under Section 2802.
Some initial caveats are worth mentioning:
First, Section 2802 is a product of California state law. It will not apply to business and employees who operate outside of California, though other states may have similarly worded laws that protect their employees. Consult an employment attorney in your area.
Second, Section 2802 only applies to actual "employees", not independent contractors. Determining the difference between an employee and an independent contractor can often rely on fact-sensitive contexts. Just because you are labeled an "independent contractor" does not necessarily make you one. For more information see the Handel on the Law article here: 'Employees versus Independent Contractors' or consult an employment attorney.
To demonstrate that an employer has violated section 2802, you must show that: (1) you are an employee; (2) you incurred necessary expenses either in the discharge of your duties or in obeying the employer's directions; and (3) the employer failed to reimburse you for such expenses.
An employer is not required to reimburse you for any and all expenses you may incur - but rather, only those expenses that are necessary to perform your job duties (or that foreseeably occurred as a result of your employer's instructions). 2802 reimbursements will apply only towards expenses incurred from the scope of your employment. What specifically constitutes a "necessary" expense within the scope of your employment is often a factual question that is determined on a case-by-case basis. However, if you are under specific instructions from an employer that causes you expenses that are reasonably foreseeable, chances are that 2802 reimbursement protections will apply.
Your home commute to and from work will not apply, but any travel expenses while on the job will.
Before an employer's duty to reimburse is triggered under section 2802, he or she must either know or have reason to know that you have incurred an expense. Once the employer has such knowledge, then he or she has the duty to exercise due diligence and take any and all reasonable steps to ensure that you are paid for the expense. Don't just assume they will know. When in doubt, bring it to your employer's attention.
2802 does not restrict methods of reimbursement. An employer may satisfy 2802 reimbursement obligations by paying certain employees increased wages or commissions instead of separately reimbursing them for their actual expenses - provided there is a method to determine what amount is being paid for labor performed and what amount is reimbursement for business expenses. So if you are a traveling salesman for a company, an employer can inform you that you will be paid a higher fixed sum in comparison to the sales co-worker who stays in the office, in order to compensate for your gas expenses which you are otherwise responsible for. As long as the extra salary actually covers the full amount of your employment expenses, there need not be a precise reimbursement based on submitted receipts.
Section 2802 also requires an employer to indemnify an employee who is sued by third persons for conduct in the course and scope of his employment. So if you are making deliveries in the course of your work and get into a car accident, your employer is obligated to indemnify you if you are sued by the person you crashed into. The key to consider is if the facts which gave rise to the lawsuit from the third party arose during the scope of your employment. Employers are not obligated to provide an attorney or "defend" you in the lawsuit - merely to reimburse you for any expenses from the lawsuit. (As a practical matter, the employer or your employer's insurance company may find it cheaper, in the long run, to provide you with an attorney if the case doesn't settle.)
In 2001, the California legislature amended section 2802 to specifically allow those who sue under a 2802 claim to recover their attorney's fees. Before this amendment, employees had been discouraged from suing to recover small work-related expenses because the cost of filing suit for it almost always outweighed what they stood to recover. Now, section 2802 (c) reads: "For purposes of this section, the term 'necessary expenditures or losses' shall include all reasonable costs, including, but not limited to, attorney's fees incurred by the employee enforcing the rights granted by this section."
You should not be expected to shoulder the business expenses of your employer. If you are a bona fide employee in California and have to pay costs out of your own pocket in order to perform your essential job duties, California Labor Code 2802 is designed to protect you. If you feel that you have a case or issue regarding business expenses that you were forced to pay for but were never reimbursed, please consult a California employment law attorney.
Employees Rights Attorneys in California, United States
[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com nor any of its affiliates shall have any liability stemming from this article.]
