California's labor laws require employers to reimburse all employees for any personal expenses they may incur while rendering services for their employer.  This includes automobile expenses if the employee is required to use their personal automobile while rendering services for the employer.

 

While most companies honor this obligation with white collar or executive personnel, the rule is often overlooked with lower paid staffers.

 

Starbucks learned this lesson the hard way.  For the third time in the past 12 months, Starbucks was involved with a class action claim over its payroll practices.  This case was a class action lawsuit involving approximately 6,000 current and former California retail store managers who claimed that they "regularly drive their own vehicles to perform work-related tasks, such as making bank deposits, getting supplies and attending meetings."  The case reportedly settled for the whopping sum of $3 Million.

 

This was a very expensive lesson for Starbucks in the importance of adhering strictly to California's techincal payroll rules.  Although employers may require employees to drive their own vehicles, the California Labor Code specifically requires employers to reimburse workers for all job-related expenses.  Automobile expenses are covered by the California law.  Every employer should have an expense reimbursement policy.

 

Although Starbucks' policy allowed for mileage payments to be made to corporate executives, it didn't - until after this lawsuit - reimburse travel expenses when store-level staff drive their cars on business related trips.

 

As we previously reported in our November 2008 Compliance Matters (November 11 - Compliance Matters), the standard mileage rate set by the Internal Revenue Service for 2009 is 55 cents per mile.  We have also discussed the various methods for determining the proper amount for mileage reimbursements in our July issue of Compliance Matters (July 11 - Compliance Matters).

 

In addition to the cost of the settlement, Starbucks no doubt incurred a sizable bill for the attorneys' fees associated with its defense of the class action suit.  Added to that is the hundreds of hours in lost productivity by personnel at the company who were involved in the defense of the case.  All of that expense could have been avoided if the company instead had invested in an audit of its payroll practices by a qualified labor law expert.

Your contact at the Firm is ready to assist you if you have any questions about this topic or wish to arrange for a payroll practices audit.