Do I Have to Reimburse My Employees for Personal Auto Use?
We will be looking at an explanation from the Wage and Hour Division of the Department of Labor about the Fair Labor Standards Act, specifically about employee reimbursements.
Generally, the FLSA requires covered employers to pay non-exempt employees no less than the federal minimum hourly wage for all non-overtime hours worked in a given workweek. 29 U.S.C. § 206. Employees must receive these wages “free and clear.” 29 C.F.R. § 531.35. An employee’s wages include the “reasonable cost” of “board, lodging, or other facilities” that primarily benefit the employee, and therefore the reasonable cost of such items count towards satisfying an employer’s obligation to pay the minimum wage. 29 U.S.C. § 203(m). But the cost of “other facilities” that are primarily for the benefit or convenience of the employer cannot be counted as wages. 29 C.F.R. § 531.3(d). Those costs include tools of the trade, required uniforms—or required use of a personal vehicle. An employer violates the FLSA “in any workweek when the cost of such tools” (and the like) “cuts into the minimum or overtime wages required to be paid….” Id. § 531.35. Therefore, an employer violates the FLSA if the employee’s wages, minus expenses, end up below the federal minimum wage for a given non- overtime workweek. See id.; see also id. §§ 531.3(d), 531.36(b).
A reimbursement to cover expenses incurred on the employer’s behalf or for the employer’s convenience is sufficient if it “reasonably approximates the expenses incurred.” Id. § 778.217(a).2 A reimbursement amount based on IRS guidelines, including the annual standard mileage rates, “is per se reasonable.” Id. § 778.217(c).
While employers must keep records of “the dates, amounts, and nature” of items added to or deduct from each nonexempt employee’s wages, neither the FLSA nor WHD’s regulations require them to keep records of employees’ actual expenses. Id. § 516.2(a)(10). Employers are instead required to keep records that they used to determine the number of additions to or deductions from wages paid. Id. § 516.6(c)(2).