Understanding Employee Expense Reimbursement Rights

Reimbursement of employee expenses still baffles some employers.  Labor Code Section 2802 ensures that employees are not forced to bear the cost of doing their jobs. It requires employers to reimburse workers for necessary expenses and losses incurred in the course of their employment.

What Is California Labor Code Section 2802?

California Labor Code § 2802  provides:

“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…”

This simply means that if an employee spends their own money or suffers a loss while performing their job duties, the employer must reimburse them—as long as those expenses are reasonable and necessary. So, while an employee may prefer to fly first class to a trade conference, reimbursing him or her for a basic economy ticket will equally comply with the Labor Code.   

What Qualifies as a “Necessary Expenditure”?

Common reimbursable expenses under Section 2802 include:

• Mileage, parking, or car expenses when using a personal vehicle for work
• Cell phone or internet usage required for work
• Home office costs, such as a portion of electricity or office equipment  
• Travel expenses, including airfare, lodging, and meals during business trips
• Tools and equipment, if the employer does not provide them and they are necessary to the job
• Uniforms or other job-specific clothing not suitable for everyday wear

To be reimbursable, the expense must be:

• Directly related to the job
• Reasonable and necessary
• Properly documented (receipts or logs may be required)

Employer Obligations

Employers must:

• Provide a clear reimbursement policy
• Reimburse expenses in a timely manner
• Not retaliate against employees who request reimbursement
• Cover expenses even if the employee did not get prior approval, as long as the expense was necessary

Courts have consistently ruled in favor of employees when interpreting Section 2802. For example, in Cochran v. Schwan’s Home Service, Inc. (2014), the court held that employers must reimburse a reasonable portion of cell phone bills when employees are required to use their personal phones for work—even if the employee has an unlimited plan or incurs no additional cost.  On the other hand, home office costs may not be reimbursable when the employer offers an in-office option to the employee and the employee elects to work from home for their own convenience.  

Expense reimbursement can be a challenging and confusing subject for employers. Working with legal counsel when creating and communicating expense reimbursement policies can help ensure a smooth implementation process, minimizing litigation concerns.

Best, 

Jehan N. Jayakumar