This requirement, found in Labor Code section 2802, is interpreted quite broadly by the courts because California law and public policy favor protecting employees from an employer passing operating costs onto employees.

• The requirement to reimburse employees includes common expenses such as work-related travel and dining expenses and mileage when an employee uses a personal car for work-related business but also some uncommon expenses. However, a court recently ruled that Labor Code section 2802 does not apply to public employers.2

For all other employers, the requirement to reimburse employees includes common expenses such as work-related travel and dining expenses and mileage when an employee uses a personal car for work-related business but also some uncommon expenses.

For example, in one case, a state Court of Appeal found that section 2802 extends to debts employees incur on which they make no payments.3 In the case, the employee made mistakes in ringing up and processing returns of retail items that resulted in a monetary loss for the company, so the company made the employee sign a promissory note for the loss in connection with its loss prevention policy.

Among other issues addressed in the case, the court held that the employee incurred a loss under section 2802 when the employer directed the employee to become personally liable for necessary business-related expenses. Business losses or damaged property without dishonesty, gross negligence or a willful act on the employee's part are not the employee's responsibility.

Another case held that although government COVID-19 mandates required remote work arrangements, employers are still responsible for reimbursements of business expenses that occurred during that time.116 This decision provides clear direction for employers to reimburse all necessary business expenses that an employee incurs necessary to discharge their duties.

• Effective January 1, 2026, California law clarifies that, with respect to the construction trucking industry, a commercial motor vehicle driver who owns the truck, tractor, trailer, or other commercial vehicle that they use in the course and scope of their employment is entitled to reimbursement for the use, upkeep, and depreciation of that truck, tractor, trailer, or other commercial vehicle.4 This applies whether the vehicle is owned by the driver as an individual or whether the vehicle is owned by the driver through a corporate entity. The reimbursement amount can be negotiated between the driver and employer or by the driver's union, if represented, and the employer. The amount negotiated can be a flat fee or per-mile reimbursement, but in either case, it can't be less than the amount expended by the driver.

In extreme cases, an employer may have to indemnify employees sued by third parties for conduct within the scope of employment.5

Wage laws, such as those regulating the time and place of payment, do not apply to expense reimbursements. You can reimburse expenses on any reasonable schedule.

Employees can bring a lawsuit against employers who do not comply with this law in order to recover the amount of unreimbursed expenditures, including the costs and attorney’s fees incurred by the employee in bringing the action.

The Labor Commissioner also has the authority to issue citations and penalties against employers that fail to reimburse employees for employer-required expenses.

The sections below discuss some of the common reimbursement issues.

• Because Labor Code section 2802 is applied very broadly, employers should consult with legal counsel with any concerns about whether employees are being properly reimbursed for work-related expenses.

IRS Mileage Rates

• In recent years, the IRS has published their annual mileage reimbursement rate in late December.

The IRS sets a mileage rate based on an annual study of vehicle operating costs. It is considered the most reasonable reimbursement rate by California state agencies.

The IRS typically publishes their annual mileage reimbursement rate in mid-to-late December. For the most recent rate, visit the IRS website /tax-professionals/standard-mileage-rates.

Employers may reimburse employees for mileage at or below the rate allowed by the IRS as long as the chosen rate covers all actual expenses incurred. Anything beyond the IRS rate may be taxable as wages if the chosen rate exceeds actual expenses. If an employer uses a lower mileage rate than the IRS rate, the employer must show that its rate sufficiently reimburses employees for their actual expenses.

Required Cell Phone Use

If an employer requires employees to use a personal cell phone for work purposes, it must reimburse the employees a reasonable percentage of the employees' cell phone bill.

A California court of appeal ruled that an employer must reimburse an employee if the employee is required to use a personal cell phone to make work-related calls; this is true even when the employee did not incur an extra expense by making the work calls because they had an unlimited data plan.

The court ruled that “reimbursement is always required,” and the employer must pay “some reasonable percentage” of the employee’s cell phone bill to comply with the Labor Code.6 To prove liability, the court said that an employee only needs to show is that “he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.”

What constitutes a “reasonable percentage” is not a simple standard for employers to apply, and, unfortunately, the court did not provide additional guidance.

The case is limited to situations where the employer requires employees to use their personal cell phone for work-related purposes and doesn’t specifically address sporadic use by employees because they want to use a personal cell phone versus being required to use it.

Training-Related Expenses

If the employer requires the employee to undergo a training course, it must generally reimburse employees for the cost of the course.

Remember that you also must pay the employee for the time spent in training that is related to the employee’s job. For more information regarding when training time counts as hours worked, see Education and Training Time.

Some jobs require a specific type of license to legally practice in that field, including real-estate agents, cosmetologists, registered nurses, and attorneys. The Division of Labor Standards Enforcement (DLSE) distinguishes between training costs required by law, such as a license required by the state, versus employer-required training.7

Some employers offer educational tuition assistance to incentivize and retain employees. These benefits are sometimes offered under contracts in which the employer offers the benefit in exchange for the employee's promise to repay the employer if the employment ends before a specified term, sometimes referred to as “stay or pay” agreements.

• Effective January 1, 2026, California law limits employers' ability to offer benefits under these agreements by making it unlawful to include in any contract entered on or after January 1, 2026, a provision or term that does any of the following if the worker's employment or work relationship with a specific employer ends:

• Requires the worker to pay an employer, training provider or debt collector for a debt.
• Allows the employer, training provider or debt collector to resume or initiate collection of or end forbearance on a debt.
• Imposes any penalty, fee or cost on a worker.

The law has some exceptions for repayment agreements, including the following related to education:

• Contracts related to tuition repayment for a “transferable credential” (a degree that is not required for current employment and is transferable and useful for future employment) so long as the contract:
• Is offered separate from any contract for employment.
• Does not require obtaining the transferable credential as a condition of employment.
• Specifies the repayment amount before the worker agrees to the contact, and the repayment amount doesn't exceed the cost to the employer.
• Provides for a prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period and does not require an accelerated payment schedule if the worker separates from the employment.
• Doesn't require repayment to the employer if the worker is terminated, except if the worker is terminated for misconduct.

Keep in mind that this exception applies only to tuition assistance for degrees that are not required for current employment. If the training/education is required for the employee's current position, you must pay for the training or reimburse the employee for the cost of training under Labor Code section 2802.

Employers that offer tuition assistance should consult with legal counsel about this new law to help ensure compliance.

According to the DLSE, there's generally no requirement that an employer pay for training leading to licensure or the cost of licensure for an employee if the license is required by the state or locality as a result of public policy; the employee bears the cost of obtaining the license. However, if the license isn't required by statute or ordinance but is simply a requirement set by the employer, the employer must reimburse for the cost.8

You aren’t required to reimburse employees for the cost of training required to obtain such licenses. But if you require specialized training in addition to the licensing requirements, you’ll need to reimburse the employee for those expenses.

For example, a case involving police officers highlights the issue of mandatory training and what must be paid for when, by law, the job requires a particular type of training, certificate or license.9

A city required all newly hired police officers to attend and graduate from the city's police academy. Police officers were required to sign an agreement stating that they intended to maintain employment with the policy department for at least five years and would reimburse the department for academy training costs if they left before then to work at a different law enforcement agency.

The City of Los Angeles requires all newly hired police officers to attend and graduate from the Los Angeles Police Academy. Police officers were required to sign an agreement stating that they intended to maintain employment with the Los Angeles Police Department (LAPD) for at least five years and would reimburse the LAPD for academy training costs if they left before then to work at a different law enforcement agency.

The city successfully sued 40 former officers for violating the agreement. The officers appealed, arguing that the agreement to repay the training costs violated Labor Code section 2802 because the police department required all officers to attend its specific academy.

The city successfully sued 40 former officers for violating the agreement. The officers appealed, arguing that the agreement to repay the training costs violated Labor Code section 2802 because the police department required all officers to attend its specific academy.

The court held that the additional training was not required by statute or public policy but was instituted “purely to satisfy the needs of the city ... ” As a result, the court held that the cost of the additional training was an expense the city must pay for and the agreement requiring repayment of training costs was invalid.

Uniforms

Generally, when employers require uniforms, employers must provide them to the employees, according to the IWC Wage Orders.

However, employers aren't required to reimburse employees for non-uniform work clothing. A court case considered whether employers must reimburse restaurant staff for slip- resistant shoes under Labor Code section 2802. The court concluded that the shoes were not a “necessary expenditure” requiring reimbursement because the shoes were not part of a “uniform” under the IWC Wage Orders.10

For more information on uniforms, see Tools, Uniforms and Equipment Explained.

1. Lab. Code sec. 2802