A California court ruling in a dispute over beauty products has the potential to impact mileage reimbursement rules for employers. It merits a response that includes a review of current policies and the addition of improvements where needed.
The ruling in Hanover Insurance Co. v. Poway Academy of Hair Design Inc., grew out of class-action suit by beauty college students who made wage and hour claims including one that they were required to purchase beauty products used in their jobs without reimbursement. Poway submitted the suit to Hanover, which denied coverage citing the wage and hour exclusion in its employment practices liability insurance policy. Hanover then sued Poway to get summary-judgment validation from a federal judge, but he ruled the “kit claim” for reimbursement did not, in fact, fall under the wage and hour exclusion.
Advice from attorneys
“While these exclusions purport to bar coverage for claims brought under laws that govern ‘wage and hour’ practices, lawsuits involving ‘wage and hour’ violations often include alleged violations of other labor-related statutes,” writes Amanda Hairston of San Francisco law firm Farella Braun + Martel.
The Richmond, Va.-based firm Hunton & Williams has advised that, “The Poway Academy decision is a significant reminder for employers facing ‘wage and hour’ claims that each claim must be assessed on its own merits, and that the mere presence of a ‘wage-and-hour’ claim does not necessarily mean that the entire claim or lawsuit is excluded from coverage by a ‘wage-and-hour’ exclusion. In fact, as was the case in Poway Academy, the presence of just one potentially covered claim required the insurer to defend the entire litigation … .”
Actions for employers
While the decision in this case turned on the interpretation of a section of the California Labor Code that requires employers to reimburse employees for reasonable business expenses, its national implications are clear. Mileage reimbursement rules for employers must be specific and up to date.
In developing and refining a reimbursement policy, employers should focus on the details, the process, and the tools required in order to make the policy work for everyone.
They should make plain the requirement that employees have valid driver licenses and adequate automobile insurance. Then they should add as much detail as needed to cover anticipated contingencies, such as excluded activities like personal trips and commutes to and from home.
The documentation associated with mileage reimbursement is important not only for expense control but for claiming the employer’s own tax deduction for mileage reimbursement. Accurate documentation comes from a rigorous process that builds in safeguards, encourages questions, and includes a monitoring system that will uncover abuse.
Complying With Mileage Reimbursement Rules for Employers Requires Increased Automation
Automating the process greatly improves mileage verification and results in significant savings. SureMileage by CompanyMileage provides employers a secure and accurate system for employees to manage mileage reimbursement. It automates the process by tracking expenses to be reimbursed rather than claims of miles driven, virtually eliminating inflated estimates from odometer readings.
Complying with mileage reimbursement rules for employers takes the vigilance required to comply with the latest best practices along with the latest tools built with those practices in mind.