California Labor Code Section 2802: Employer Reimbursement Rules for Work Expenses

Introduction

Are you footing the bill for work-related expenditures? You may be entitled to a sizable compensation from your employer under California Labor Code Section 2802.

Many Californians unwittingly support their employers by paying for work-related expenses themselves, such as paying for the internet at home while working from home or using their own cell phones for professional conversations. Such conduct is against state law and has an effect on your own money.

Employers are required to reimburse employees for all “necessary expenditures” made while carrying out their job tasks under California’s labor laws. Remarkably, this protection covers a wide range of regular expenses that many employees merely accept as personal commitments, going much beyond evident charges like company travel.

This article describes the legal requirements of California Labor Code Section 2802, lists seven frequently disregarded costs that your employer is required to compensate, and describes what to do if your business does not fulfill these significant reimbursement duties. Knowing these safeguards could help you save hundreds of dollars a year, whether you work remotely or in an office.

Legal Requirements of California Labor Code Section 2802

Section 2802 of the California Labor Code provides vital financial safeguards for workers across the state. Many employers either intentionally ignore or misinterpret the required repayment responsibilities created by this potent legislation.

1. “Necessary Expenditures” as Defined by California Labor Code Section 2802

“An employer must compensate their worker for all required expenses or losses suffered by the worker in direct result of the execution of their obligations,” the statute makes clear.

What does the term “necessary expenditures” actually mean? Subsection (c) of Section 2802 states that “all reasonable costs” are included in this. Any fair expense that arises directly from carrying out your duties or adhering to instructions from the employer is covered by this broad description.

These safeguards also cover uncommon circumstances. Employers are required to pay workers even if they follow potentially illegal instructions, according to the code, “unless the worker, at the point of following the directives, considered them to be illegal.”

Notably, employers are unable to negotiate a way out of these duties. Any arrangement that waives a worker’s entitlement to full payment is expressly forbidden under Labor Code Section 2804, which also declares such contracts “null and invalid.”

2. Relevance to Public vs. Private Employers

There is a significant difference in who is required to abide by these reimbursement guidelines. Unless expressly extended to public institutions, Labor Code regulations typically are restricted to private companies.

This restriction has been clarified by the California courts. For example, counties, towns, and state entities are not automatically covered by California Labor Code Section 2802. Because the Education Code expressly gives the university the power to establish its own policies regarding employee equipment benefits, judges decided in a landmark decision that California State University was not bound by Section 2802.

Public agencies must nevertheless carefully examine the laws that govern them. They might still be held liable if it doesn’t specifically address employee cost reimbursements.

3. Gattuso v. Harte-Hanks & Others: Legal Precedents

The Gattuso v. Harte-Hanks ruling has had a considerable impact on the interpretation and execution of California Labor Code Section 2802. According to the landmark ruling made by the California Supreme Court, employers are supposed to cover the car expenses of employees when these employees utilize their cars for business activities.

The court also discussed appropriate reimbursement practices. The justices concluded that, as long as the selected method covers all necessary actual expenses, Section 2802 does not require a particular manner of compensation.

• Real expense reimbursement: Although thorough, this approach was thought to be laborious and frequently unfeasible.
• Reimbursement as per IRS mileage rates: Approved by the Division of Labor Standards Enforcement as “presumptively reasonable.”
• Lump-sum payment: As long as it leads to complete reimbursement, lump-sum reimbursement is accepted as being in compliance with Section 2802.

Significantly, the court also decided that businesses can combine regular remuneration (such as higher base salaries or commission rates) with expenditure reimbursement. To determine the amount of the joint worker payment that is meant to reimburse expenses, they must, nevertheless, “present some technique or formula.”

Interest is charged on all Section 2802 reimbursement awards from the day the expense took place. Additionally, businesses that fail to meet their repayment duties may receive citations from the Labor Commissioner.

Seven Unrecognized Costs That Employers Must Pay

Employers in California are required to pay employees for a variety of regular expenses that frequently go unreported, in addition to the obvious business costs. These seven often-ignored costs are legally required to be covered by your business under California Labor Code Section 2802.

1. Using a Personal Cell Phone for Work

In situations where employees utilize their own phones at the workplace, there is an obligation that the employers will reimburse an equitable percentage of the cell phone bills. Most importantly, although employees may be fully covered or may not incur additional costs, this does not exempt them from this requirement.

This doctrine was laid down by the landmark Cochran v. Schwan Home Service case, which ensures that regardless of the type of contract, workers receive fair compensation when using cell phones for their official work. The majority of companies compensate employees for their mobile charges in the range of $30 to $50 per month, with an average of $40.20 per employee.

2. Remote Work Using Home Internet

Employers are required to reimburse a fair portion of remote workers’ home internet expenses when necessary for them to carry out their working responsibilities. Whether the work-from-home arrangement was required by a government decree or an employer policy, this requirement still exists. The Thai v. IBM decision from July 2023 affirmed that remote employees must receive payment for all costs they incur in carrying out their job responsibilities, including internet connectivity. Basically, your company should cover this cost if your employment demands internet access.

3. Vehicle Depreciation and Mileage

Employees are eligible for mileage reimbursement when using their personal automobiles for work-related purposes (apart from daily commuting). The IRS mileage payment rate for 2025 is 70 cents for each mile. In addition to gasoline expenses, this also includes registration fees, insurance, maintenance, and depreciation of the car. As long as they completely cover all required expenditures, employers are free to adopt alternate calculating methods, such as one-time payments or actual spending tracking.

4. Equipment and Office Supplies

Desks, ergonomic seats, paper, ink, writing instruments, and other office items that are purchased for work-related objectives are eligible for reimbursement. Many employers had to pay for the establishment of home offices throughout the pandemic. Accordingly, the reimbursement obligation applies to devices such as printers, computers, and ergonomic furnishings required to carry out job activities effectively.

5. Business Travel: Accommodations, Food, and Transportation

The costs of business travel go well beyond simple transportation. Lodging, food, fees for parking, tolls, taxi rates, public transportation, exchange rate fees for foreign travel, and even appropriate tips are all covered expenses. Many firms now implement cost-cutting measures, such as mandating economy-class travel or establishing maximum meal budgets.

6. Work Document Postage and Shipping

Are you paying for the mailing or delivery of documents and supplies relevant to your job? In fact, Section 2802 allows for reimbursement of these expenses. Employers are obviously not allowed to charge their workers for business expenses, such as required courier and postage services.

7. Subscriptions to software and licensing costs

Required software expenses are reimbursed in addition to hardware requirements. If certain software or internet subscriptions are necessary for your employment, your company is required to either supply them directly or pay for them. This includes specific apps, premium software packages, or internet services that are necessary for carrying out your work duties.

Voluntary Action vs. Employer Direction

There is a significant difference between costs that are mandated by the employer and costs that are the consequence of an employee’s free will. Expenses made through “subservience to the orders of the employer” are covered by Labor Code 2802, which clarifies the duty to refund employer-directed charges.

However, cases involving voluntary arrangements are more complex. There is “a very compelling argument that workers’ remote work costs are not ‘essential’ and shouldn’t be compensated” if a firm has reopened its offices and workers are free to return but opt to work remotely instead. Employers should immediately make clear their policy about which costs will be reimbursed when remote employment is voluntary rather than mandatory.

Relevant elements are identified by the Illinois Department of Labor, whose reimbursement law is similar to California’s:

• Whether the worker anticipates payment
• Whether the cost is required to carry out work responsibilities
• Whether the company gets something for which it would otherwise have to pay
• How long does the employer profit from the cost?

Calculating Appropriate Percentages for Shared Use Items

Items used for both personal and professional functions account for a large portion of expenses, especially for remote workers. Employers are required to cover a “justifiable percentage” of the expense in these situations.

Employers should decide how to fairly distribute shared resources, such as cell phones or internet service, based on consumption relevant to the job. “No company will be able to ascertain the precise fraction of an employee’s spending that is work-related,” according to one employer guidance. As a result, many businesses set flat monthly sums that they feel adequately cover work-related expenses.

Even in cases when workers have limitless plans and experience no additional expenditures from business usage, California courts have determined that reimbursement is necessary for cell phones. The same holds true for distant workers’ home internet.

Employers can also reduce costs by offering company-owned devices, such as cell phones, laptops, and hotspots, which removes the need to figure out personal device usage percentages.

The employer is in charge of making sure that costs are “necessary” and “fair” during this procedure, as well as keeping the proper records for tax purposes.

What happens in case businesses do not reimburse?

The firms that fail to comply with the minimum reimbursement provisions included in the California Labor Code Section 2802 will be brought to justice with harsh penalties. These are some of the means by which the employees will be able to reclaim their reimbursement of these unpaid expenses.

1. Making a Complaint to the Labor Commissioner of California

Employees may submit a wage claim to the California Labor Commissioner’s Office, formerly the Division of Labor Standards Enforcement, when employers refuse to pay for essential business expenses. This offers a low-cost venue for discussing salary infractions. Both parties receive a “Notice of Claim & Conference” from the Labor Commissioner following the submission of an “Initial Report / Claim” form. The goal of this conference is to settle the matter without holding a full hearing.

The matter goes to an official hearing if there is no settlement. During this procedure, the worker needs to show:

• A labor contract that stipulates certain payments
• Work finished in accordance with the contract
• Inaccurate payment according to the contract
• Employer’s responsibility for fines

2. Interest, fees, & penalties: Recoverable damages

Workers who win are eligible to receive more than just their initial costs in compensation. Under California law, employees are entitled to:

• The entire amount of unpaid expenses
• Interest began to accrue as soon as each expense had been paid for.
• Fees paid to attorneys in order to enforce reimbursement rights
• Court expenses related to litigation

The Labor Commissioner may make an Order, Decision, or Award (ODA) as a ruling from the court against the business if the company continues to refuse to pay after receiving the ODA.

3. Systemic Violations Class Action Lawsuits

When multiple employees experience identical infractions, class action lawsuits provide a potent recourse. Legal counsel for a multitude of impacted workers at once is made possible by these lawsuits.

Class actions work especially well when employers routinely underpay for typical expenses like mileage or mobile phone use. Class actions offer efficiency in addition to collective strength, as they allow numerous employees’ unpaid expenditures to be recovered through a single case.

In addition to their portion of settlement winnings, employees who act as representative plaintiffs usually earn extra remuneration for their time and work.

Conclusion

One of the most robust labor laws in the country is California Labor Code 2802, which prevents employees from using their own money to support their employers. We’ve looked at how this statute establishes required reimbursement duties throughout this piece, which go much beyond clear-cut company expenses.

Before anything else, whether or not these expenses were specifically approved, employers are required to reimburse all “essential expenditures” that directly flow from job duties. Numerous daily costs that many employees incorrectly consider as personal responsibilities are covered by this protection, including office supplies, cell phone bills, home internet, and vehicle depreciation.

In addition to their portion of settlement winnings, employees who act as representative plaintiffs usually earn extra remuneration for their time and work.

These provisions have been further reinforced by court rulings such as Gattuso v. Harte-Hanks & Thai v. IBM, which established that businesses cannot avoid compensation obligations only because workers chose flexible work schedules or incur no additional expenditures. Therefore, even employees with limitless phone plans should be paid for use connected to their jobs.

Instead of keeping track of individual spending, businesses looking for administrative simplicity may want to consider wage-expense reimbursement, which would increase compensation. However, this strategy necessitates precise documentation outlining which part deals with reimbursement duties and must completely cover all required business expenses.