Labor & Employment Law

Employees Are Not Required to Exhaust Internal Expense Reimbursement Procedures Before Suing -- Stuart v. RadioShack

California employees have a right to be reimbursed for their work related expenses, such as business travel, equipment, materials, training, and even legal expenses.  On the other hand, companies typically have their own deadlines, rules, special forms, and  other procedural requirements which must be followed in order to request and receive reimbursement.

So what happens when an employee sues for reimbursement and the Company argues that his claim should fail because he did not make a proper request under its internal rules?

In Stuart v. RadioShack, the Northern District addressed this very question and held, in effect, that the requirements of the statute must override any internal reimbursement rules set by the employer. 

Indeed, California Labor Code section 2802 provides that "An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties."  And Section 2804 further provides that "Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void." 

Thus, companies must reimburse employee expenses and the parties can't do anything to forfeit or limit these rights even if they wanted to.  According to the District Court, the employer's duty to reimburse expenses should be triggered by the same standard that applies in cases of "off-the-clock" work:

The Court concludes that a fair interpretation of [Labor Code] §§ 2802 and 2804 which produces 'practical and workable results,' consistent with the public policy underlying those sections, focuses not on whether an employee makes a request for reimbursement but rather on whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If it does, it must exercise due diligence to ensure that each employee is reimbursed.

The Bottom Line:  Employer's should continue to set internal deadlines and procedures for expense reimbursement.  However, they should also recognize that the failure to follow these procedures will ultimately not  be a defense to legal liability if they know or have reason to believe the expense was actually incurred.

Full post as published by California Labor & Employment Defense Blog on October 10, 2009 (boomark / email).