Some California employers and employees misunderstand California's commission-employee classification. Just because an employee earns a bonus on the number of sales he has or his total sales in a month, the state may not classify the employee as a commission employee when determining whether the employee is exempt from state labor laws. The employer must base the commission amount on a percentage of the sale price of the product. Even if the employee receives wages through commissions only, the employer must reimburse his expenses, including gas and mileage.
California requires employers to reimburse travel expenses for employees who use their own vehicle for work purposes. The state's reimbursement law applies to hourly, salaried and commissioned employees. In California, a commissioned employee receives all or part of his compensation based on a percentage of the product's price.
California Labor Code Section 2802, among other statutes, contains the statute that requires employers to reimburse employees for all expenses incurred by employees when performing work-related duties. These expenses include not only gas but also wear and tear on the employee's vehicle if the employer does not provide a company vehicle. This law applies to all employees. However, if the employer classifies the commissioned employee as a contractor and gives him a Form 1099 at the end of the year instead of a Form W-2, the contractor must calculate the expenses in the contract bid price instead of receiving a reimbursement.
California employers do not have to reimburse mileage using the rate provided by the Internal Revenue Service, although many do use that rate. The law specifies that the employer must reimburse all expenses so if the IRS standard mileage rate does not reimburse the employee for all expenses, the employer must pay a higher rate.
California employers can pay the employee a higher commission instead of a mileage reimbursement to reimburse expenses if the employer specifies that the increased commission is in substitute for mileage and gas reimbursement. The employer must also provide his employees with his method of determining how he determined the required increase amount to cover the employee's expenses.
- State of California Department of Industrial Relations: Wages
- California Employee Rights Blog: Commissioned Salespeople & Overtime, Part 2 -- Are You "Commissioned"?
- Oncle: Califronia Labor Code Section 2802
- United Employees Law Group: California Expense Reimbursements
- Nixon Peabody: California Supreme Court Validates Different Expense Reimbursement Approaches -- As Long As Actual Expenses Covered