In California, employers must reimburse employees for "reasonably incurred" business expenses. Labor Code section 2802 so provides.
Typically, employers reimburse employees for actual expenses on a dollar for dollar basis: a business meal, a hotel stay, air fare, etc. When an expense is hard to measure (such as business use of an automobile), employers can approximate the expense by paying the employee an amount per mile driven on business. The IRS mileage reimbursement rate, currently $0.485, is one way of estimating the cost / mile. Of note, the DLSE likes the IRS rate, but no law requires employers to follow it. Conversely, employees may claim automobile expenses above the IRS rate if they can prove they are entitled to them.
Harte-Hanks Shopper, Inc. chose another method. Harte-Hanks would pay employees a higher rate of pay that was intended to "cover" expenses. Frank Gattuso brought a class action challenging that policy.
The Supreme Court decided that employers may pay extra wages to employees to cover reimbursable expenses, but they must be accounted for so the employee can determine whether he or she is receiving full reimbursement, and so that taxing authorities can distinguish between reimbursed expenses and wages.
Caution: This opinion is not a license to under pay employees a lump sum that does not fully compensate them for expenses. The employee may challenge the reimbursement amount as insufficient before the Labor Commissioner or in court. Instead, the opinion is helpful because it does not bind the employer to a specific method of reimbursement.
The case is Gattuso v. Harte-Hank Shopper, Inc. The opinion is here.