California Labor Law Provides 4 Year Statute of Limitations for Reimbursable Expenses

It is not unusual for employees to reach into their own pocket to pay expenses that relate to their job. A typical list includes the following:

• Using your car for business
• Cleaning clothing required to be worn at work
• Purchase, maintenance or loss of tools and equipment
• Expenses related to attending training or educational materials
• Travel
• Cell phones
• Lodging and meals
• Entertainment

An easy way to figure out if an expense should be paid back to you is to simply ask yourself the following question:

“Is this an expense that my company expects me pay for their benefit?” If the answer is yes you are probably entitled to be reimbursed.

To state it another way, the law requires employers to pay employees for any business expenses that arise out of an employee’s reasonable performance of job duties.

For example, if an employee must drive a car (other than to commute to and from work), pay for client entertainment, or make cell phone calls then Section 2802 of the labor code requires the employer to reimburse the employee for the expense.

An employee is entitled to recover all or a portion of unreimbursed business expenses that was paid in the last four years even if he agreed to forgo reimbursement, took an amount that is less than his costs or agreed a salary or commission that was supposed to include reimbursement for these expenses.

This law also covers anyone who was misclassified as “independent contractor”. There are many instances where a person believes he is an independent contractor but in fact is an employee. It does not matter if the error was made by an honest misunderstanding or intentionally. It also does not matter if the misclassification was made by the employer or the employee. It is the law that decides who is an employee and all the rights given to employees.

The law specifically requires an employer who provides a fixed expense allowance or an enhanced commission rate, ensure that expense
reimbursement payments fully cover all necessary expenses. The enhanced portion of any compensation that is supposed to cover all expenses paid by an employee must be identified by the employer by setting forth the method or formula used.

It is the employer’s obligation to show that all expenses incurred by its employees have been fully reimbursed because Labor Code Section 2804 forbids an employer to permit an employee to waive the right to reimbursement. Employees must be reimbursed for all necessary expenses of the employer.

Employers are liable for business expenses even when an employee has failed to submit required expense reports. The law focuses not on whether an employee requests reimbursement but rather on whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If the employer has that actual or constructive knowledge, then it must exercise due diligence to ensure that the employee is reimbursed.

An employee should not pass up his right to receive reimbursement because no claim was made in the past or there is little or no documentation. This could occur when an employee does not understand his rights was misinformed or was discouraged from making a claim.

Not only does an employee have the right to reimbursement for business expenses but has the right to recover attorney’s fees, interest and penalties.

We as California labor lawyers know that an employee is not like a company that has the money to pay attorneys to protect them. That is why our law firm provides representation paid solely from money that we recover from the employer. In other words we help level the playing field.

If you have questions about this or any California Labor Law issue please call our offices at : 408-648-4248