Golden State Protections: Required Employee Reimbursements Under § 2802 of the California Labor Code

California has some of the greatest protections for workers of any state, including expansive antidiscrimination provisions under the California Fair Employment and Housing Act (FEHA) and generous overtime pay requirements under the California Labor Code. While many employees may be aware of these provisions, they may not know that California state law also provides extensive protections for employees under the reimbursement requirements of § 2802 of the California Labor Code. The California Labor Code § 2802 requires that employers reimburse employees for all necessary expenses or losses incurred during the course of their employment duties. This requirement extends to all employees in the state, regardless of salary or title, and employees cannot waive their rights under the law, which means employers and employees cannot contract around this requirement. While independent contractors are not covered by the code, due to the fact they are not considered employees under the law, this provision still covers the vast majority of California’s over 13 million workers.
This reimbursement provision has been in place since the California Labor Code was first published in 1937, and was amended to its present-day form in 2000. The provision has been read very broadly by courts over the years, imposing significant liability on employers who shirk its requirements. The code applies to any and all expenses, including cellphone, hotel, travel, and other expenses incurred by employees fulfilling their job duties. The only expenses clearly excluded from the code are travel expenses incurred commuting to and from work. California Labor Code § 2802 is also significant because it requires employers to pay for any attorney fees or other expenses employees incur to recover reimbursements and to defend criminal or civil suits from third parties for actions undertaken in furtherance of their employment duties. Under the code, employers must pay for expenses they know or reasonably should have known employees have incurred. The 2009 case of Stuart v. RadioShack Corp. has clarified that once employers have reason to know of an employee expense, it is their responsibility to undertake the due diligence to ensure the employee is adequately reimbursed.
One recent case in the Northern District of California highlights the reach and significance of § 2802. The case of Hopkins v. Stryker Sales Corp., decided just last month by District Court Judge Lucy Koh, demonstrates the complexity of this provision and its protection of employees from subsidizing their employer’s business expenses. In this case a group of former employees of Stryker Sales Corp., a medical device company, filed for class certification of their claims under § 2802 for non-reimbursement of employment-related expenses. These employees had worked as salespeople for the company which they allege had an official policy of not reimbursing its sales representatives. The plaintiffs claimed that the company issued memos stating they would not reimburse salespeople for their expenses incurred while driving to client sites, staying overnight in hotels, accessing internet and e-mail while on the road or calling clients on their cellphones. The company defended itself by citing the 2007 case of Gattuso v. Harte-Hanks Shoppers Inc., in which the Supreme Court of California held that companies may satisfy the requirements of § 2802 through increased salaries or commissions, as long as they make clear to their employees which portion of their salaries or commissions are to go towards their reimbursements. Further, employers under Gattuso must ensure that the additional salary or commission adequately reimburses employees for their expenses. Stryker Corporation in its defense in Hopkins claimed in this case that the salespeople were being reimbursed through their higher salaries and commissions at the company, therefore discharging its duties under § 2802.
Judge Koh in Hopkins did not agree with the defendant’s line of argument, finding that the company may have failed to adhere to the requirements in Gattuso in ensuring that their salespeople were adequately reimbursed. She also found that there were issues of triable fact as to whether the company informed their employees as to what portion of their salaries and commissions were actually reimbursements. Judge Koh consequently certified the class of plaintiffs in Hopkins, finding that there were common issues of fact and law about whether Stryker violated § 2802 that were in play.
While the court’s decision in Hopkins is precedential only on the issue of class certification, it does stand as an important example of the kinds of § 2802 claims that arise every day in California. What is clear from this case and many others brought under the code is that employees are protected under the labor code from being forced to subsidize their employer’s business, no matter how small the expense. Being forced to pay without reimbursement for mileage to transport goods from one store to another, as was the issue in question in the 2009 case of Stuart v. RadioShack Corp., or for mileage, hotel rooms, internet access or cellphone expenses while soliciting clients, as in Hopkins, is illegal in California and has been for over 70 years. In these difficult economic times especially, employees should never feel forced to dip into their pockets just to keep their jobs.

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