Q: I TRAVEL several times a month as part of my job duties using my own car. I also make several business-related calls on my personal cell phone. My work duties sometimes require me to stay out of town overnight and I incur further expenses. My employer pays me a fixed amount of money, included in my taxable wages. My higher wages is supposed to account for all my business-related expenses, but this does not seem to be enough. What are my rights in this situation?
A: Under California law, an employer shall reimburse an employee for all necessary expenditures incurred in direct consequence of the discharge of the employee’s duties. These include costs spent complying with the employer’s instructions. If your travel expenses and cell phone use were necessary for you to be able to do your job, then your employer should pay for these.
Other expenses reimbursable to employees include:
(1) transportation, living, and other travel expenses;
(2) purchasing, laundering or repairing uniforms or special clothing required by the employer;
(3) purchasing supplies, tools, materials, or equipment;
(4) for “supper money” to cover the cost of supper when an employee is requested to work during the evening hours; and
(5) excess home-to-work travel expenses incurred by the employee due to extraordinary circumstances.
Is the employer allowed to fulfill its reimbursement obligation by paying employees increased wages instead of separately reimbursing them for their actual expenses? This is the question that employees had in the case of Gattuso v. Harte-Hanks Shopper, Inc.
Frank Gattuso is an outside sales representative in Harte-Hanks’s Southern California unit. Harte-Hanks distributes advertising materials in California. To sell advertising space in its publications, Harte-Hanks employs outside sales representatives to meet customers in person at their places of business. Outside sales reps must drive their own vehicles to contact customers. Harte-Hanks does not separately reimburse outside sales reps for their automobile expenses.
Gattuso and other employees sued Harte-Hanks in a class action seeking reimbursement for expenses incurred in using their own vehicles to do their work. In response, the employer claimed that that it had complied with the reimbursement law by paying its outside sales reps higher base salaries and higher commission rates than its inside sales reps. The case went all the way to the California Supreme Court.
The Supreme Court ruled that an employer may fulfill its legal reimbursement obligation by paying employees enhanced compensation in the form of increases in base salary or increases in commission rates, or both. However, there must be a means or method to apportion the enhanced compensation to distinguish what amount is being paid for labor performed and what amount is reimbursement for business expenses.
The court emphasized that wages and expense reimbursement are not the same thing. An employer should not combine the payments for both if doing so would violate any law. This means the employer must provide some method or formula to identify which of the combined amount is intended as wages (payment for work performed) and which is intended as expense reimbursement.
An employer is allowed to pay employees a lump-sum amount sufficient to provide full reimbursement for actual expenses necessarily incurred. However, if an employee shows that the reimbursement amount is less than the actual expenses incurred, the employer must pay the difference. Lastly, employers may not take any deductions from the reimbursement amount, e.g., expense reimbursement is not taxable.
There are other methods allowed by law for employers to reimburse employees for business expenses. If employees have questions regarding this issue, they would be smart to consult with an experienced employment attorney.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.