Expense Reimbursement: What Your Employer Must Pay For
You drive your personal car for work. You use your phone for work calls. You buy supplies the company needs. You pay for internet so you can work from home. Under California law, every one of these expenses must be reimbursed — and the obligation is not waivable, not optional, and not dependent on whether the employer has a reimbursement policy.
Labor Code section 2802 states the rule simply: an employer must indemnify an employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of their duties. The statute does not say “if the employer agrees to reimburse.” It does not say “if the employer has a policy.” It says the employer must reimburse. The obligation is automatic, arising from the employment relationship itself.
Despite its clarity, section 2802 is one of the most widely violated provisions in the California Labor Code. Violations are common not because employers are unaware of the law but because the expenses are diffuse — a few dollars here, a tank of gas there, a monthly phone bill — and employees often absorb them without recognizing that each unreimbursed expense is a violation with a remedy.
What must be reimbursed
The statute covers “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of their duties.” The key words are “necessary” and “in direct consequence.” The expense must be incurred because the employment required it, and it must be the kind of expense that the employee would not have incurred but for the employment.
Personal vehicle use. An employee who drives their personal car for work-related purposes — client meetings, deliveries, errands, travel between job sites — is entitled to reimbursement for the mileage at a rate that covers the actual cost of operating the vehicle (fuel, maintenance, depreciation, insurance). The IRS standard mileage rate is commonly used as a reasonable approximation, though the actual cost may be higher. Commuting from home to the primary workplace is generally not reimbursable, but travel from the workplace to other locations during the workday is.
Cell phone expenses. An employee who uses a personal cell phone for work-related calls, texts, or data is entitled to a reasonable percentage of the monthly bill — even if the employee has an unlimited plan and the work use does not increase the cost. The California Court of Appeal held in Cochran v. Schwan’s Home Service (2014) 228 Cal.App.4th 1137 that the employer must reimburse a reasonable percentage of the cell phone bill when the employee is required or expected to use a personal phone for work, regardless of whether the employee incurs additional costs. The rationale is that the employer is benefiting from the employee’s personal resource, and the employee should not bear the cost of providing it.
Home internet and office expenses. An employee who works from home — whether by choice or by employer mandate — and who uses a personal internet connection for work purposes is entitled to reimbursement for a reasonable portion of the internet cost. If the employee purchases office supplies, printing materials, or other items needed to perform the job from home, those expenses are also reimbursable.
Tools, equipment, and supplies. An employee who is required to provide their own tools, equipment, or supplies to perform the job — and who is not separately compensated for doing so — is entitled to reimbursement for the cost. This includes safety equipment, specialized tools, software licenses, and any other item the employer requires the employee to provide.
Uniforms and work clothing. When the employer requires specific clothing — a uniform, a particular style of dress, safety gear — the cost of that clothing is a necessary business expense. Labor Code section 2802 and the IWC Wage Orders separately address this obligation, and the employer must either provide the required items or reimburse the employee for obtaining them.
Travel expenses. An employee who travels for work — flights, hotels, meals during business travel — is entitled to reimbursement for the reasonable costs incurred. The employer may set reasonable limits on travel expenses (coach rather than business class, per diem meal allowances), but it may not refuse to reimburse legitimate travel costs incurred at the employer’s direction.
How much must be reimbursed
The reimbursement must cover the employee’s actual or reasonably approximated expenses. The employer is not required to pay more than the actual cost, but it is required to pay no less.
For expenses that are shared between personal and business use — a cell phone used for both work and personal calls, an internet connection used for both work and streaming — the employer must reimburse a reasonable percentage. What is “reasonable” depends on the proportion of use, and the employer and employee may agree on a method of calculation. A flat monthly stipend is permissible if the amount reasonably covers the business portion of the expense. A stipend that is materially less than the actual business-use cost is not sufficient.
The obligation cannot be waived
Section 2802 is not a default rule that the parties can override by agreement. It is a mandatory protection. An employer may not require an employee to sign a waiver of reimbursement rights, and a provision in an employment agreement purporting to shift business expenses to the employee is unenforceable.
This means an employer that tells employees “you are responsible for your own cell phone bill” or “mileage is part of your compensation” has not satisfied its obligation — it has attempted to waive it, which the statute does not permit.
Penalties for noncompliance
An employee who is not reimbursed for necessary business expenses can recover the unreimbursed amounts, plus interest. If the failure to reimburse continues through the termination of employment, the unreimbursed amounts are “wages” for purposes of the final-paycheck statutes, and the employer may be subject to waiting time penalties under Labor Code section 203 — up to thirty days of additional pay.
In class actions and PAGA claims — which are common in expense reimbursement cases because the same policy typically applies to all similarly situated employees — the aggregate liability can be substantial. An employer that fails to reimburse mileage for a fleet of field sales representatives, or that fails to reimburse cell phone costs for a call center workforce, faces exposure that grows with the number of employees and the duration of the violation.
Common violations
No reimbursement policy at all. The employer simply does not reimburse business expenses. Employees absorb the costs as a condition of the job. This is the most straightforward violation and the easiest to prove.
Insufficient stipends. The employer provides a flat monthly stipend — $50 for cell phone use, $100 for vehicle expenses — that does not cover the actual costs. A stipend is permissible if it is reasonable, but a stipend that falls materially short of the employee’s actual expenses does not satisfy the statute.
Reimbursement conditioned on approval. The employer has a reimbursement policy but requires prior approval for each expense, and routinely denies claims or delays payment. The employer may establish reasonable procedures for submitting reimbursement requests, but it may not use the approval process to avoid the obligation.
Failure to reimburse remote work expenses. The employer transitioned employees to remote work and did not reimburse the home internet, phone, and office supply costs that the employees now incur. The shift in work location does not eliminate the employer’s obligation — it changes the categories of expense that must be reimbursed.
If you use your personal car, phone, internet, or equipment for work — and your employer does not reimburse you for the cost — the employer is violating California law. The obligation under section 2802 is automatic, mandatory, and not waivable. Every unreimbursed business expense is a violation, and the amounts accumulate over time.
This article is general information about California law and is not legal advice. Every situation turns on its particular facts.