We have a manager who is always late submitting his expense reports, in violation of company policy. This week, he submitted a request for mileage reimbursement covering numerous months, some dating back to last year. Can we have a policy that if employees’ expense reimbursement claims are not turned in on time, they will not be paid?
The short answer is no. As discussed below, even if an employee’s expense reimbursement claim is turned in late according to the company’s policy, the employer still is obligated to reimburse the employee up to the statute of limitations.
Labor Code
California Labor Code Section 2802 requires that employers reimburse employees “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.”
This simply means that if an employee spends their own money or incurs a loss while performing their job duties, the employer must reimburse them for the expense.
Expense reimbursement covers a wide range of work-related costs such as travel and dining expenses, reimbursement for personal cell phone usage and mileage reimbursement when an employee uses their personal car for work-related business. The courts interpret and broadly apply Labor Code Section 2802 because California law and public policy favor protecting employees from an employer passing on business costs to employees.
Expense Reimbursement Policy
California law does not specify a time frame for submitting business expenses. Employers are permitted, however, to have an expense reimbursement policy requiring employees to submit business expenses within a reasonable time frame and on a regular schedule.
The policy should stipulate a deadline for submitting expense reports. For example, employers typically require employees to submit business expenses monthly.
The policy also should address any forms, receipts or mileage logs required for submitting a request for expense reimbursement. Employers should process reimbursement expenses on a customary schedule and issue reimbursement checks following clear time frames.
Employers also should clearly communicate any reimbursement procedures to employees, so employees understand what is required to submit expense claims under the company expense reimbursement policy.
Late Expense Claims Must Be Paid
Importantly, even if an employee expense claim is submitted late under a company’s expense reimbursement policy, the employer still is obligated to pay it.
In this case, even though the manager’s mileage reimbursement claims were submitted late and included mileage claims dating back to the previous year, the employer was obligated to issue the manager a reimbursement check once his paperwork was received.
Under California law, the statute of limitations for expense reimbursement claims is up to four years. This means, despite any policy to the contrary, an employee may be able to seek reimbursement for necessary expenses within four years of incurring the expense.
Possible Disciplinary Issue
Although the manager here must be paid for his mileage claims, the employer can address his repeated late expense claims submissions. The employer can discipline the manager for violating the company expense reimbursement policy.
Employers should make sure to consistently apply expense reimbursement policy submission guidelines to all employees. Consistent enforcement of expense reimbursement policies can help discourage late expense reimbursement claims and ensure compliance.
Because Labor Code Section 2802 is applied very broadly, employers should consult with legal counsel before denying any employee expense reimbursement claims.
Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred members and above. 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.
