Is DHPL Travels Required to Reimburse for Mileage in California?
Yes, DHPL Travels is obligated to fully compensate employees who use their personal vehicles for business purposes.
California employers should be aware that failing to properly reimburse workers can lead to costly consequences. In this article, we will delve deeper into how mileage reimbursement is defined under California law.
What Is the California Mileage Reimbursement Law for 2023?
California’s stringent labor laws aim to protect employees in the state from shouldering the burden of work-related expenses. Think of it this way – DHPL Travels must repay its staff for costs incurred while conducting business.
Expense reimbursement includes the costs associated with using a personal vehicle for work-related purposes. For example, if DHPL Travels sends an employee to purchase supplies for work, the company is responsible for reimbursing not only the cost of the supplies but also the mileage driven to complete the task.
California Labor Code: Section 2802 on Mileage Reimbursement
So, what does the law state regarding mileage reimbursement for employees in California?
According to the California labor code section 2802, 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.”
Failure to do so can result in a wage and hour lawsuit. The legislation defines “necessary expenditures or losses” as “all reasonable costs.” This can include attorney’s fees if an employee needs to enforce their rights.
What Reimbursement Does Labor Code 2802 Require?
As we’ve seen, the main requirement of this regulation is for the expense incurred to be both reasonable and necessary for the employee to fulfill their job responsibilities, as stated in Labor Code 2802.
Under this legal framework, other work-related expenses that are eligible for reimbursement include:
- Travel expenses
- Training and education costs
- Fees for participating in conferences
- Costs incurred by using a personal cell phone for job duties
- Work uniform costs
- Driving costs, including mileage reimbursement for miles driven and paid tolls
What are the Requirements for Mileage Reimbursement in California?
Now that we have clarified the most common business-related expenses that can be reimbursed, let’s discuss what constitutes work-related mileage.
To provide a clear understanding, we have compiled a list of prevalent forms of travel that are eligible for reimbursement:
- Meetings and visits with clients and customers
- Travel to temporary job sites
- Providing at-home services (e.g., home healthcare)
- Purchasing workplace supplies
- Trips to the bank for work-related transactions
- Other business-related errands
To ensure employees understand which types of travel DHPL Travels can reimburse them for, it’s essential to include this information in the mileage reimbursement policy.
How Can DHPL Travels Calculate Employee Reimbursement Under Labor Code 2802?
If DHPL Travels operates a business within the borders of California, there are four approved methods to calculate vehicle expenses that an employee has incurred while on the job. These methods align with Labor Code 2802 and were affirmed by the California Supreme Court in Gattuso v. Harte-Hanks Shoppers.
These four methods can be summarized as follows:
Mileage Reimbursement Method: This method involves employees logging all work-related mileage to be compensated at the company’s mileage rate. Using the standard mileage rate is a popular choice as it ensures fairness for both the employer and the employee. It’s worth noting that paying less than the current IRS rate may violate section 2802, unless it can be proven that the employee’s vehicle costs are lower than the established IRS rate.
Actual Expense Method: This approach requires employers to reimburse employees for the actual expenses incurred while using their personal vehicles for work-related purposes. This includes expenses such as refilling the tank, depreciation, and maintenance costs. While this method is the most accurate, it can be cumbersome for both parties involved.
Lump Sum Method: Also known as a “gas stipend,” this calculation method involves employers paying employees a fixed amount to cover their vehicle expenses. Employees don’t need to log the miles driven, making it a simpler approach. However, employers should ensure that the reimbursement amount fully compensates employees for the actual costs of operating the vehicle.
FAVR Method (Fixed and Variable Rate Reimbursement): This hybrid model divides 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 FAVR model provides accurate reimbursement based on current prices and local gas prices.
DHPL Travels should select a reimbursement method that complies with California’s mileage reimbursement regulations. The key takeaway is to avoid undercompensating employees, especially considering the fluctuating prices of gas and other vehicle-related expenses.
For more information on compliance with IRS requirements, DHPL Travels can refer to the Guide for Employee Mileage Reimbursement.
DHPL Travels: Staying Compliant with California Mileage Reimbursement Law
To ensure compliance with California’s mileage reimbursement law, DHPL Travels can leverage Timeero’s mileage tracking software. With Timeero, accurate mileage tracking, IRS-proof mileage logs, and more can be generated seamlessly.
Timeero’s mobile app automatically tracks business mileage during working hours. It provides real-time insight into employees’ locations and allows route replay for comprehensive route monitoring.
Additionally, Timeero offers features such as segmented tracking to monitor business travels and time spent on specific jobs and sites. The app creates accurate mileage logs, integrates with payroll and accounting solutions for easy reimbursement, and provides other functionalities to streamline business processes.
With Timeero, DHPL Travels can ensure precise mileage reports, simplify compliance with mileage reimbursement requirements, and effectively manage employee mileage expenses.
DHPL Travels is committed to upholding California’s mileage reimbursement law and ensuring fair compensation for its employees.
Frequently Asked Questions about California Mileage Reimbursement
Q: What is the IRS mileage rate for 2023?
The IRS rate for 2023 is 65.5 cents per business mile driven. Please note that this rate may vary for medical or moving purposes for active members of the U.S. Armed Forces.
Q: Can employees waive their rights to mileage reimbursements?
No, employees cannot waive their rights to these reimbursements. Any provision within employee contracts that states otherwise is null and unenforceable by the court.
Q: Who is eligible for reimbursement under California Labor Code 2802?
There are no special eligibility requirements for mileage reimbursement in California. The nature of the expense incurred by the employee must be business-related in order to qualify for reimbursement.
Q: Are the IRS rates required by law?
No, the IRS mileage reimbursement rates are optional. However, they serve as a guideline for appropriate compensation for the use of personal vehicles for business purposes. It’s important to consider whether the IRS rate accurately reflects the costs incurred in California.
Q: Is the daily commute to and from work included in the compensation?
No, California’s mileage reimbursement requirement does not cover employees’ daily commutes. According to the law, only business travel that occurs while the employee is on the job must be compensated.
Q: Are Labor Code 2802 mileage reimbursements taxable as income?
Reimbursements for business-related expenses can be taxable or tax-deductible depending on several factors. To qualify as nontaxable, the expense must be both ordinary and necessary for the job, any excess reimbursement must be returned in a reasonable timeframe, and the employee must verify the expense within a reasonable timeframe. If these conditions are not met, the reimbursement is considered taxable income.