Compensation for Using Personal Vehicle for Work

In California, if employees use their personal vehicles for work-related tasks, employers are generally required to compensate them for the associated costs, like mileage reimbursements. This requirement is rooted in California Labor Code Section 2802, which mandates that employers reimburse employees for any “necessary expenditures” they incur to perform their jobs. This can cover a range of expenses, including fuel, car allowance, mileage reimbursement, maintenance, insurance, and depreciation for using a personal vehicle for work purposes.

What Qualifies as Work-Related Travel?

Work-related travel includes the driving required to perform job duties, but it does not typically cover regular commuting to and from work. Examples of work-related travel may include:

1. Traveling to meetings or conferences off-site.
2. Running errands for the company, such as picking up office supplies or delivering documents.
3. Driving between multiple job sites in a single workday.

It’s important for both employees and employers to understand that compensation for business mileage and other costs are not optional. If the employee’s use of their vehicle is a necessary part of their job, mileage reimbursement and other car allowances are required by law.

Types of Reimbursement Methods

Employers can choose how to reimburse employees for vehicle use, as long as the method reasonably covers the employee’s expenses. Common reimbursement methods include:

1. Mileage Reimbursement: The most straightforward and widely used approach is reimbursing based on mileage allowance. California employers often follow the IRS standard mileage rate, which adjusts yearly to reflect current fuel prices and other vehicle-related costs. For instance, in 2023, the IRS mileage rate was 65.5 cents per mile. By reimbursing employees per mile, employers cover fuel, maintenance, insurance, and depreciation, which makes it a convenient option for tracking costs.
2. Actual Expense Reimbursement: Some employers may reimburse based on actual expenses. This approach requires employees to keep detailed records of all vehicle-related costs, including gas, repairs, insurance, depreciation, and any other fixed costs. While this can be more accurate, it is often cumbersome to manage, and therefore, it’s less common than a mileage reimbursement policy.
3. Vehicle Allowance: Employers may also provide a fixed vehicle allowance as a monthly stipend to cover work-related vehicle expenses. However, this amount must adequately cover the employee’s expenses to satisfy the Labor Code requirements. If a flat stipend doesn’t fully cover costs, employees may have the right to claim additional reimbursement for vehicle costs.

Legal Requirements and Protections

California Labor Code Section 2802 mandates that employers reimburse employees for necessary work expenses. Failing to provide fair reimbursement can lead to penalties and potential lawsuits. Under this law, if employees believe they aren’t being adequately compensated for vehicle expenses, they can file a claim with the California Division of Labor Standards Enforcement (DLSE) or speak to an employment attorney, like the ones at Lawyers for Justice, PC, to recover unpaid expenses, interest, and other costs.

Tracking and Documentation for Reimbursement

For employees seeking employee mileage reimbursement, it’s essential for them to track mileage accurately. This includes keeping detailed records of dates, destinations, and miles driven for each work-related trip. Many employees use mileage-tracking apps or a mileage log to ensure they’re reimbursed accurately. Employers can also require documentation, but must avoid placing unreasonable burdens on employees seeking to claim expenses.

Potential Consequences for Non-Compliance

If an employer fails to reimburse for work-related travel costs, they may face serious legal repercussions. Employees can file a wage claim to recover the costs. California law permits employees to collect interest on the unpaid reimbursement amount, along with possible compensation for other factors if the case is successful.

Gas vs. Mileage Reimbursement

In California, employees using personal vehicles for work-related tasks are entitled to reimbursement for those expenses under Labor Code Section 2802, which ensures that employers cover “all necessary expenditures” tied to work duties. When it comes to travel, employers commonly choose either mileage reimbursement or gas reimbursement to cover these costs. While both approaches provide compensation for vehicle-related expenses, they differ in what they cover and how they’re calculated.

Mileage Reimbursement

The mileage reimbursement approach is the most common method for work-related vehicle expenses. As we mentioned above, it is typically based on the IRS standard mileage rate. The rate is designed to cover more than just gas. It includes a portion for fuel, along with wear and tear on the vehicle, maintenance, insurance, and depreciation costs.

• Pros: Mileage reimbursement simplifies expense tracking for both employers and employees, covering a broad range of expenses associated with personal vehicle use. It’s also not counted as taxable income meaning employees don’t need to report it.
• Cons: Because it’s a set rate, it may not accurately reflect real costs for all employees, especially if fuel prices or maintenance costs fluctuate significantly.

Employers typically prefer this method because it eliminates the need to track individual expenses like gas and maintenance receipts. Employees can easily log miles and submit them for reimbursement, and it provides a consistent standard for covering vehicle-related costs.

Gas Reimbursement

Alternatively, gas reimbursement only covers the cost of fuel. With this method, employees must provide receipts for gas purchases, and reimbursement is limited to the fuel expenses directly associated with work-related travel.

• Pros: Gas reimbursement might work for short-distance travel, where maintenance, insurance, or depreciation costs are minimal, or if the employer provides other stipends for these additional expenses.
• Cons: Gas reimbursement is generally seen as less comprehensive than mileage reimbursement because it doesn’t account for maintenance, depreciation, or wear and tear. As a result, employees may find themselves out-of-pocket for these additional expenses unless their employer offers separate reimbursement.

Legal Compliance and Practical Considerations

Under California law, it’s critical that any reimbursement approach reasonably covers the actual costs incurred by the employee. Mileage reimbursement is often more straightforward for this reason since the IRS rate is widely recognized as a fair estimate of overall vehicle costs. Gas reimbursement alone could be insufficient and may open an employer to legal risk if employees demonstrate that their actual expenses exceed the reimbursement provided.

For employers, using the IRS mileage rate ensures compliance and predictability. Employees, on the other hand, should keep detailed records of all work-related miles and expenses, as well as any additional vehicle costs if they’re receiving gas-only reimbursement, to ensure fair compensation.

Do Employers Have To Pay For Mileage? – FAQ

does mileage reimbursement include tolls? None of the standard mileage rates include tolls or parking costs, so employees would have to calculate those costs on top of their mileage reimbursement policy.

how much do you get paid for mileage? As of January 1st, 2024, the standard mileage rate was 67 cents per business mile.

is mileage reimbursement required by law? In California, employers are legally required to reimburse their employees for all necessary expenses related to work-related travel, including mileage.

how do you calculate mileage reimbursement? It depends on the employer’s mileage reimbursement policy, but there aforementioned options mileage reimbursement, gas reimbursement, vehicle allowance.

do employers have to pay mileage? Employers must reimburse employees for all travel related expenses they incur if they are made to travel for work.

how much should you get paid for mileage? As of January 1st, 2024, the standard mileage rate was 67 cents per business mile.

does the mileage rate include gas? Yes, it encompasses gas expenses, as well as depreciation of a personal vehicle.

can you get reimbursed for gas and mileage? It depends on the employer’s policy, but usually one of the aforementioned three categories would cover a typical car allowance.