Most of us have to drive to get to work, but some types of employment require driving in order to perform job duties. For instance, sales people sometimes have to travel between stores to make their sales, and caregivers have to chauffeur their charges to appointments. This can become expensive for positions where you drive a lot, so there are rules mandating that employers repay employees what they spend on their cars in order to do their jobs. This is called mileage reimbursement.
What We Mean By Mileage
Mileage, at first glance, may sound like you are being paid for how far you drive. It’s more than that, though. It covers any expense an employer racks up because they are operating a vehicle for work. Mileage should cover gas, insurance, repairs, and car depreciation, and your employer should be tracking these expenses. The only way out of mileage reimbursement for an employer who wants you to drive on official business is to provide a work vehicle and cover all the expenses of running it.
IRS Mileage Rates
Mileage is only loosely regulated at the federal level. The Internal Revenue Service has a chart with suggested standard rates based on the type of business you are in, but its purpose is to help a taxpayer, such as a self-employed individual, figure out what to deduct from their taxes as business expenses. They recommend that you deduct $0.58 per mile for businesses, $0.14 for charity work, and $0.20 per mile for medical or moving purposes.
Mileage reimbursement for Californians is set forth in Labor Code Section 2802, which states that an employer has to pay any reasonable expense that an employee has to incur while that person is doing his or her job. The next section of the labor code, 2804, disallows employees waiving their rights to compensation. You can negotiate the original price, and, if you can prove that your employer’s compensation package doesn’t completely cover the necessary expenses of driving for the company, you can challenge the compensation scheme.
However, the method that a company uses to compensate you for your mileage can vary. According to the 2007 ruling, Gattuso v. Harte-Hanks Shoppers, an employer can simply increase base pay or commission rates, provided there is some way to determine how much of that increase is to reimburse you for business expenses. This is called the ‘lump sum’ method of reimbursement.
There are two other ways that an employer can compensate you for driving your car for work. They can use the ‘actual reimbursement’ method, where the employee records all their car related expenses, the employer figures out which part of those expenses are work related, and repay the employee that amount.
The slightly less labor-intensive method is the ‘mileage reimbursement’ method. This is where employers provide a monthly reimbursement based on standard rates and how many miles you drove. Employers can take the IRS standards as a reasonable reimbursement schedule, but they are not obliged to stick with that. So long as they fully reimburse you one way or the other, they can set their own rates.
Mileage reimbursement gets complicated, and it is easy for companies to underestimate how much an employee is spending on his or her car in order to work for them. When that happens, you may need to speak to a lawyer. Fortunately, Aiman-Smith and Marcy specialize in employment law, as well as consumer fraud and class action lawsuits. We have years of expertise that we can apply to your situation. If you feel that you have been cheated, contact us.