The U.S. Department of Labor's Wage and Hour Division (WHD) has issued an opinion letter that addresses whether employers must use the IRS mileage rate to reimburse employees when they use their personal vehicles for work purposes.
Note: An opinion letter is an official written opinion by the WHD of how a particular law applies in specific circumstances presented by an employer. Any employer may request an opinion letter, but the WHD determines to which requests it will respond. While opinion letters generally don't carry the same force as a law or regulation and apply only to the specific circumstances presented by the employer, they can offer insight about how the WHD may enforce certain laws.
Background:
Under the federal Fair Labor Standards Act (FLSA), generally any work-related expense incurred by an employee that would bring the employee's pay below the minimum wage (or cut into overtime pay) must be reimbursed.
When reimbursing employees for business-related driving, many employers use the IRS standard mileage rate.
Opinion Letter:
In a recent opinion letter, the WHD addressed whether the FLSA requires employers to use the IRS rate to reimburse pizza delivery drivers who use their personal vehicles. The WHD stated that the FLSA's regulations permit reimbursement on a reasonable approximation of the expenses incurred, using any appropriate methodology. That said, the IRS rate is presumed to be a reasonable approximation, but employers may use other methods to the extent that they result in a reasonable approximation of the expenses incurred, according to the WHD. Employers may also calculate the actual costs and reimburse accordingly.
Compliance Recommendations:
Social distancing and other precautions related to the COVID-19 pandemic may mean more employees are using their personal vehicles for work purposes. Employers should make sure they are reimbursing employees who do so in compliance with the law. Keep in mind that some states expressly require employers to reimburse employees for business expenses, even if the expense wouldn't bring their pay below the minimum wage or cut into their overtime pay. Please contact your dedicated service professional with any questions.