Litigating California Wage & Hour and Labor Code Class Actions

waive the right to reimbursement, so the employee was entitled to reimbursement of all
necessary expenses. As such, if an employee offered a fixed expense allowance or an
enhanced commission rate, the employer would violate Section 2802 to the extent that
payment did not, in fact, cover all the employee’s necessary expenses. 93
The Court also established a requirement that the employer must communicate to the
employees to the extent any portion of the employees’ wages is intended to be devoted to
expense reimbursement. For example, if two percentage points of a 10 percent
commission is intended to cover expenses, the Court suggested that the employer would
have to make this fact known to employees to comply with Section 2802. The Court also
stated that, going forward, the employer would be required to identify the portion of the
wage payments that was allocated to expenses on the employees’ itemized wage
statements (required under Labor Code Section 226(a)). 94
Although the Court clarified that only necessary expenses require reimbursement—as
opposed to any expense that is incurred in the course of performing work—the Court did
not provide much detailed guidance on how to distinguish a necessary expense from an
unnecessary one. In discussing how an employer and employee would decide whether
mileage expenses were truly necessary, however, the Court suggested that it would be an
individualized inquiry that could vary markedly from one employee to another:
In calculating the reimbursement amount due under Section 2802, the employer may
consider not only the actual expenses that the employee incurred, but also whether each of
those expenses was “necessary,” which in turn depends on the reasonableness of the
employee’s choices.
For example, an employee’s choice of automobile will significantly affect the costs incurred.
An employee who chooses an expensive model and replaces it frequently will incur
substantially greater depreciation costs than an employee who chooses a lower priced
model and replaces it less frequently. Similarly, some vehicles use substantially more fuel
or require more frequent or more costly maintenance and repairs than others. The choice
of vehicle will also affect insurance costs. Other employee choices, such as the brand and
grade of gasoline or tires and the shop performing maintenance and repairs, will also affect
the actual costs. 95
Separate from Gattuso, another decision issued in 2007 held that the employer has a duty
to reimburse for employee business expenses. In Estrada v. FedEx Ground Package
93
94
95
Id. at 570-71.
Id. at 574 n.6, 575-76.
Gattuso, 42 Cal. 4th at 568.
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