Are Your Expense Reimbursement Policies Up To Date?

The Division of Labor Standards Enforcement proposes to adopt regulations regarding Travel Expense Reimbursement policies. The proposed regulations (available at http://www.dir.ca.gov/dlse/2802Regs/2802Regs-ProposedText13700-13706.pdf) cover expense reimbursement requirements for mileage, travel, lodging, meals and other expenses related to business travel.

Under the proposed regulations, employers can either pay the actual costs employees incur for travel or they can pay the applicable Internal Revenue Service rate. The meal and lodging rates differ depending on the city to which the employee travels and is based on IRS Publication 1542 (available at www.irs.gov/pub/irs-pdf/p1542.pdf). If the employer wants to pay the applicable Internal Revenue Service rate for meals and lodging as opposed to the actual amounts incurred, the employer must inform their employees of the policy before the expenses are incurred.

For mileage reimbursements, employers must pay the IRS mileage allowance. The IRS recently increased the mileage allowance to 48.5 cents per mile. Under the proposed regulations, employers can pay less than 48.5 cents per mile, but only if they can prove that the specific employee’s mileage reimbursement rate is less than the applicable IRS rate. This would require the employer to keep track of the employee’s mileage as well as his or her service records. Similarly, employees could demand a higher rate if they can prove it costs more than 48.5 cents to run their car (including maintenance).

Employers must keep records of the expense reimbursement and requests, provide a pay stub identifying the expenses and pay the expenses by the end of the month following when the expenses reimbursement requests are submitted. Additionally, employees bringing a claim for expense reimbursement at the Labor Commissioner will be entitled to recover their attorneys’ fees even at the administrative level.

The DLSE is holding a public hearing on the proposed regulations on February 7, 2007, in San Francisco. The regulations may be revised depending on the public comments received.

Employers should review their expense reimbursement policies with a qualified attorney.

The Law Office of Phillip J. Griego
95 South Market Street, Suite 520
San Jose, CA 95113
Tel. 408-293-6341
 
Original article by Robert E. Nuddleman, former associate of The Law Office of Phillip J. Griego.
 

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