What you need to know about reimbursing employee expenses

From time to time, virtually all employees are asked to dip into their own pockets for legitimate business needs. This may take form of filling up the employee’s car with gas after a long drive to meet with a client, or buying office supplies at Staples. How many of you reading this article have asked an employee to pick up a birthday cake or flowers for another employee? So when employees do use their own funds for business needs, what is the obligation of the employer?

According to Labor Code section 2802, “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, or of his or her obedience to the directions of the employer …” As alluded to above, this usually takes the form of mileage, travel, and dining expenses.

How do I reimburse for mileage?

A year ago gas prices were through the roof. Eight months ago gas prices were lower than they had been in years. Fortunately, employers have a guide when reimbursing employers for their mileage. The Internal Revenue Service (IRS) issues a standard mileage rate that fluctuates based on gas and other travel prices. The current IRS standard mileage rate is 55 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations. Here’s how the IRS has recently taken gas prices into account when setting the standard rate: the rate was 50.5 cents at the start of 2008, then climbed to 58.5 cents in the second half of 2008, and then came down again to the current rate of 55 cents per mile.

While the rate usually adjusts each January – as evidenced by the multiple changes in 2008 – employers need to be on the lookout for changes in the IRS mileage rate to ensure that employees are being properly reimbursed.

When do I have to reimburse my employees?

Expense reimbursements are not considered wages. As such, wage laws, such as those regulating the time and place of payment, do not apply to expense reimbursements. Therefore, employers are free to make expense reimbursements on any reasonable schedule. Many employers choose to reimburse employees once a month.

Are expenses due immediately on termination?

There are specific time frames in which employers are required to pay employee wages when the employment relationship is terminated. When an employee is terminated, all wages (including vacation) are due immediately. When an employee quits and gives more than 72 hours notice, all wages are due on the last day of work. When an employee quits and gives fewer than 72 hours notice, all wages are due within 72 hours after notice is given.

Expenses work differently, however. The deadlines described above that apply to final wages do not apply to reimbursement of expenses. Reimbursements can be made at the normal time for payment – and as outlined above, employers are free to create a reasonable schedule for reimbursement of expenses.

In conclusion, the rules regarding expenses are straightforward, and few problems arise in this regard. Nevertheless, employers can save themselves problems down the road by making sure employee expenses are handled properly.

A Casual Problem? Implementing an appropriate dress and grooming policy

As far as dress goes, the modern workplace is becoming more and more casual. Suits, ties, and other formal apparel are often the exception at work, rather than the rule. Yet virtually all businesses, especially those where face-to-face customer/client interaction is required, want employees to look their best. As such, California law allows for reasonable requirements concerning employee dress and grooming. There are, however, restrictions.

For one, in California, it is generally unlawful to prohibit women from wearing pants. Moreover, requiring women to wear sexually provocative uniforms can violate FEHA. Other grooming policies may be discriminatory if they create an unusual burden on one gender in terms of expense, time to get ready for work, etc. (Jespersen v Harrah's Operating Co. (9th Cir 2006) 444 F3d 1104).

Yet a grooming policy that differentiates in some respects between men and women does not, by itself and without any further showing of disparate treatment, constitute sex discrimination. In Jespersen v Harrah's Operating Co., the employer terminated a female casino bartender for refusing to comply with the employer's grooming policy, which (1) required women to wear makeup, (2) allowed women to have long hair, while men had to have short hair, and (3) prohibited men from having painted fingernails. The court held that the grooming policy did not impose an unequal burden on women. While the employer's policy contained sex-differentiated requirements regarding each employee's hair, hands, and face, and while those individual requirements differed according to gender, none on its face placed a greater burden on one gender than the other.

Employers must also reasonably accommodate employees in implementing grooming standards that conflict with an employee's religious beliefs and practices (Bhatia v Chevron U.S.A., Inc. (9th Cir 1984) 734 F2d 1382, 1383). In Bhatia v. Chevron U.S.A., Inc., the employer required employees to shave any facial hair that prevented them from achieving a gas-tight face seal when wearing a respirator. Mr. Bhatia, a machinist, informed his employer he could not comply with the requirement because he was a devout Sikh, and his religion proscribed the cutting or shaving of any body hair. Mr. Bhatia was suspended, and eventually accepted a transfer to a janitorial position at reduced wages. The employer refused to promise it would return Mr. Bhatia to a machinist position if equipment were developed that could be used safely with a beard. The court found that while Mr. Bhatia had established a case of religious discrimination, the employer showed that it made good faith efforts to accommodate his religious beliefs, and that further accommodation would have caused it undue hardship.

In conclusion, employers must ensure that supervisors correctly administer dress and grooming policies, and that the policies themselves do not violate the rules discussed above. It is also important to make sure that such policies do not disproportionately impact one group or gender more than another.