Is mileage reimbursement required under wage and hour laws?

Q           If we require employees to use their personal vehicle for work, are we legally obligated to reimburse them for mileage or other vehicle-related expenses even if their pay wouldn’t fall below the minimum wage if we didn’t?

The Fair Labor Standards Act (FLSA) doesn’t generally require employers to reimburse employees for mileage or other vehicle-related expenses simply because they use their personal vehicles for work. Instead, the relevant inquiry is whether those unreimbursed expenses effectively reduce a nonexempt employee’s wages below the applicable minimum wage or cut into required overtime compensation. When an employee’s vehicle expenses are incurred primarily for the benefit of the employer, reimbursement may be required to the extent necessary to maintain compliance with the FLSA’s minimum wage and overtime requirements.

The answer may differ, however, under state law. Several states have enacted statutes requiring employers to reimburse employees for necessary business expenses, regardless of whether failing to do so would result in a minimum wage violation. Accordingly, employers operating in multiple jurisdictions should be mindful that reimbursement obligations can vary significantly from state to state.