EXPENSE REIMBURSEMENT: YOUR EMPLOYEE RIGHTS

In our last post, the blog posed the question whether an employee must reimburse an employer for damage or loss during the course of employment (no).  This blog now examines the flip side of that question: must an employer reimburse you for expenses you incur as an incident to your employment?  That is, if you use your cell phone for company calls, dress in a required uniform, or use your car to travel or make deliveries are you entitled to be paid back for those expenses?  Here we have an unequivocal YES.

Labor Code section 2802 mandates that any employee expense incurred carrying out the employer’s duties shall be reimbursed to the employee.  In other words, any expense incurred by the employee that is necessary for the employee to carry out his or their duties for the employer. Labor Code § 2802 states that an employer must indemnify its employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties … ” Lab.Code § 2802(a).The elements of a § 2802(a) cause of action are:

(1) the employee made expenditures or incurred losses;

(2) the expenditures or losses were incurred in direct consequence of the employee’s discharge of his or her duties, or obedience to the directions of the employer; and

(3) the expenditures or losses were necessary.” Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 CA4th 220, 230.

An employer may satisfy this reimbursement requirement by paying an increased salary or commission but only if it is clearly defined what monies are being paid for labor performed and what amount is being paid as reimbursement for business expenses. Gattuso v. Harte–Hanks Shoppers, Inc. (2007) 42 C4th 554, 559.  Importantly, an employer may be required to pay for an employee’s defense as well as any settlement or judgment if the employee is sued for conduct arising within the course and scope of employment.  For example, an employee sued for discrimination may be entitled to a defense paid for by the employee.  On the other hand, an employee who punches somebody while “on the job” may not receive a defense.  See, Grissom v. Vons Cos., Inc. (1991) 1 CA4th 52, 55.; Freund v. Nycomed Amersham (9th Cir. 2003) 347 F3d 752, 765–760.  (Section 2802 allows indemnification for employees’ defense costs when sued for actions arising out of their employment). At least one case clearly states: “The statute requires the employer not only to pay any judgment entered against the employee for conduct arising out of his employment but also to defend an employee who is sued for such conduct.” Jacobus v. Krambo Corp. (2000) 78 CA4th 1096, 1100, 93 CR2d 425, 428.  Other cases have held that the employer need only reimburse the employee for legal expenses after a determination that the employee was in the course and scope of employment at the time of the incident being sued on. As a practical matter, an employer will invariable provide a defense for claims made against an employee.  If they do not, there are several options available to the employee.

Labor Code Section 2802 may also require an employer to indemnify employees for attorneys’ fees and costs incurred in successfully defending against criminal charges arising out of acts performed in the course and scope of employment. See Los Angeles Police Protective League v. City of Los Angeles (1994) 27 CA4th 168, 177, 32.  (Note:This is not well established by case law and remains something of an open question.)