Can we have a policy that employees’ expense claims must be turned in by a certain time period, and if the employee doesn’t meet that time frame—the expense will not be paid out?
California’s Labor Code is very specific that expenses must be paid out. Section 2802 states: “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….” The code does not, however, specify a time period for the submission of expenses.
Submission Time Periods
The statute of limitations governing the submission of expenses is up to four years, but most employers prefer a far shorter time period for submission of costs.
It is therefore recommended that employers have a policy regarding when expense reports must be submitted—typically once a month is industry standard.
When late submissions become a problem, the better practice is to discipline an employee for submitting late claims. Set time frames for the submission of expenses, and guidelines for employees who travel, and follow those guidelines consistently.
Reasonable Business Expenses
Employees are entitled to be reimbursed only for reasonable business expenses, so employers can require that hotel and food costs be contained at a certain amount, and airfare be coach versus first class.
If an employee chooses the higher level of travel, he/she can be required to pay the difference between the employer guidelines and the higher amount.
Reimbursement Time Frame
Additionally, the law is not specific on when the employer is required to reimburse the employee. When an employee leaves his/her job, expenses are not required to be paid out in the same time frame as the final paycheck, but employers should not delay payment. Processing payment should be handled in the usual manner of paying expenses, and not delayed due to any problems with the departing employee.
It is best to create specific policies regarding employees submitting expenses, and employers paying them. Both sides should have firm guidelines, and adhere to them accordingly.
The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.