Wage & Hour Update: Failure To Pay Travel Expenses Costs Starbucks Millions

Christopher W. Olmsted
February 6, 2009 — 2,314 views  
Become a Bronze Member for monthly eNewsletter, articles, and white papers.

A recent class action brought by Starbucks employees serves as a reminder to employers on the topic of travel expenses.

The federal court employee class action alleged that Starbucks failed to reimburse employees for their travel expenses.

The lead plaintiff, Jonelle Lewis, worked in a retail management positions at a Starbucks in California's Amador County community of Martell. During her year and one half of employment, she regularly used her personal vehicle to perform work-related duties. The duties included making bank deposits, getting supplies from vendors, and attending meetings. Ms. Lewis alleged that on several occasions when she and others requested reimbursement for mileage, they were advised that, as a matter of company policy, Starbucks does not reimburse employees for mileage expenses.

The class action included approximately 6,000 of Starbucks' retail managers alleged to have similar experiences. Reportedly, Starbucks paid over $3 million to settle the class action.

California Labor Code section 2802, subdivision (a), requires an employer to indemnify its employees for expenses they necessarily incur in the discharge of their duties. This includes, of course travel expenses.

It is important to note that any time an employee uses his or her own vehicle for business purposes, including running an errand for business reasons, the employee has incurred expenses. The expenses take the form of fuel and wear and tear on the vehicle.

Often the IRS rate is adopted as the standard reimbursement rate, currently at 55 cents per mile. However, this is by no means the exclusive method. Any method that fully reimburses employees for actual expenses is acceptable.

Companies sometimes inadvertently overlook travel expenses incurred by lower level workers. Such oversights lead to wage and hour liability. Reportedly Starbucks had a travel expense policy applicable to corporate executives. No such policy existed for the reimbursement travel expenses when store-level staff drove their personal vehicles for business reasons.

The outcome of the Starbucks case should encourage employers to review their travel expense policies.

Practical Tips

  • Handbook. Review the company handbook, ensure that it provides that all workers are reimbursed for travel expenses.
  • Procedures. Implement procedures for employees to claim and receive reimbursement for travel and other expenses. For example, you may want to provide an expense form to all workers expected to drive their cars for business reasons. Instruct them to sign and turn in the form each month (regardless of whether actual expenses were incurred).
  • Training. Train managers and supervisors so that they know to collect expense reports or receipts from all employees running errands or otherwise using personal vehicles for company purposes.

On a related topic, ensure that the company has purchased "non-owned vehicle" insurance coverage. For more information regarding liability of employers for accidents caused by workers, email Chris Olmsted for a complimentary legal summary at [email protected]

Christopher W. Olmsted