30 Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) Seyfarth Shaw LLP | www.seyfarth.com by its terms, as in Steinhebel; rather an employee’s continued employment can constitute acceptance of those terms.165 V. Reimbursement of Employee Expenses A. The Duty to Reimburse Expenses Under Labor Code Section 2802 Labor Code section 2802 requires an employer to “indemnify” its employees for “all necessary expenditures incurred” in the course of their employment. This provision has been in effect since 1937, and over the next sixtyplus years, litigation over Section 2802 focused almost exclusively on seeking “indemnification” from the employer in the narrow insurance-context sense of the word—”to reimburse (another) for a loss suffered because of a third party’s act or default.”166 Today, plaintiffs regularly use Section 2802 as a vehicle to seek reimbursement of routine business expenses that employees incur in the course of their duties—such as driving a car or talking on a cell phone. Before 2005, all the published cases under Section 2802 involved circumstances where an employee sought to have the employer pay the cost of tools or equipment lost or damaged on the job,167 or to indemnify the employee for the cost of legal counsel the employee incurred in defending a claim based on the employee’s performance of job duties.168 But in 2007 the California Supreme Court, in Gattuso v. Harte-Hanks Shoppers, Inc., assumed (without deciding) that Section 2802 does indeed require the reimbursement of necessary business expenses.169 Often targeted for Section 2802 class actions are businesses employing large numbers of outside salespersons who are paid on straight commission. Many such businesses encourage their salespeople to make sales calls and to entertain clients to generate business. In addition, many such salespeople are constantly using cell phones because they are on the road often and lack an office. Before Gattuso, the law was unclear as to how the employer could satisfy its duty to reimburse necessary expenses. The plaintiff in Gattuso argued that with respect to business mileage, the employer had to allow employees to submit expense reports and then reimburse the employees at the IRS mileage rate. By contrast, the 165 Id. at 812 (“[A] signed acknowledgement that the employee read, understood and agreed to the compensation plan as was the case in Steinhebel and Koehl, is not the only form of assent under contract law.”). 166 Black’s Law Dictionary, 342 (2d pocket ed. 2001). 167 See, e.g., Machinists Auto. Trades v. Utility Trailers Sales, 141 Cal. App. 3d 80 (1983) (mechanic entitled to indemnification for loss of his tools from employer’s premises in a burglary when employer required that employee have tools and leave them on employer’s premises); Earll v. McCoy, 116 Cal. App. 2d 44 (1953) (employee not entitled to reimbursement under Section 2802 for tools lost in a fire on employer’s premises when employee was not required to leave tools at the place of employment). 168 See, e.g., Jacobus v. Krambo Corp., 78 Cal. App. 4th 1096 (2000) (expenses employee incurred in successful defense against sex harassment allegations); Devereaux v. Latham & Watkins, 32 Cal. App. 4th 1571 (1995) (expenses incurred by employee in connection with her depositions in two actions brought by third parties against her employer); Grissom v. Vons Companies, Inc., 1 Cal. App. 4th 52 (1991) (expenses incurred by employee in defending third party lawsuit arising out of auto accident that occurred during course and scope of employee’s employment; employee who retained his own counsel after employer provided counsel was due reimbursement for attorney’s fees incurred because retention of separate counsel was deemed necessary); Douglas v. Los Angeles Herald-Examiner, 50 Cal. App. 3d 449 (1975) (expenses incurred by employee in defending lawsuit filed as a result of services rendered by employee in course and scope of employment). 169 42 Cal. 4th 554 (2007) (noting the issue was not before the court).
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