Reimbursing Employees for Travel During the Workday

The fast food chain Carl’s Jr. was sued this week in a class action brought by California managers who claim they were not paid for expenses incurred while driving for work-related purposes.  The lead plaintiff claims that she regularly drove her personal vehicle to meetings, other restaurants and banks but was not reimbursed for mileage or other expenses.  According to the lawsuit, company policy only provided for reimbursement of business-related mileage expenses for out-of-town travel.  Other California companies have been hit with similar suits. 

The California Labor Code provides that non-commuting mileage (e.g. a run to the bank during the work day) must be reimbursed by the employer if the employee is driving his or her own vehicle and the mileage is incurred in the discharge of the employee's duties.  In fact, the law is quite broad:

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 . . .

Arguably, this applies well beyond mileage to expenses to things such as cell phones, tools, computers, internet service and office supplies if they are used for work.  Massachusetts has a similar law that requires reimbursement for all transportation expenses during the workday (not commuting). 

Obviously, if your business operates in California or Massachusetts, you need to ensure that you are complying with these laws.  If you are not in those states, do not assume you are immune to legal issues related to reimbursement for work day travel expenses.  Employment agreements and policies provide potential pitfalls for employers in this area and could be the basis for contract and promissory estoppel claims.  Also, there is always the possibility of inconsistent treatment with respect to reimbursement, which could lead to discrimination litigation. 

With gas prices rising, companies may be considering cutting back on reimbursement.  At the same time, employees may be especially sensitive to the cost of operating their vehicles.  This strikes me as a recipe for employment litigation.  It would be wise to review policies and practices in this area as soon as possible — summer may bring even higher gas prices.