The Internal Revenue Service announced the mileage reimbursement rate for 2018 will be 54.5 cents per mile.
Why should you care about the new rate?
California Labor Code, Section 2802 states: “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….” If employees use their personal vehicles for business, you must indemnify them for the use of their vehicle. Reimbursing an employee for use of their personal vehicle means more than simply reimbursing the employee for gas; employers must indemnify the employee for the “use” of their vehicle (e.g., loss of value or wear and tear due to use).
California state agencies, including the Department of Labor Standards Enforcement (“DLSE”), consider the IRS rate to be the most reasonable reimbursement rate. Employers may reimburse for mileage expenses at less than the IRS rate as long as the payment reimburses the employee for all actual expenses incurred by the employee in the operation of the vehicle for business use.
Failure to properly reimburse employees can result in litigation, including class actions. Why spend your time and energy trying to calculate the “actual expenses” and risk failing to wholly indemnify? Use the IRS rate.