I’ve now had a chance to more fully digest the Gattuso opinion. The issue that it resolves is actually rather narrow, and of little utility in either enforcing employee rights or giving compliance guidance to employers. It’s almost useless.The advance-sheet summary of the case is that Labor Code 2802 reimbursements can be paid in the form of a higher salary or commission, so long as there is a formula. Omitted from that summary is that

[i]f the employee can show that the reimbursement amount that the employer has paid is less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method), the employer must make up the difference.

(Slip. Op. at 16.) (Emphasis added.) What’s more, even though

as with other terms and conditions of employment, a mileage rate for automobile expense reimbursement may be a subject of negotiation and agreement between employer and employee. . . any agreement made by the employee is null and void insofar as it waive the employee’s rights to full expense reimbursement under section 2802.

(Slip. Op. at 17.) (Emphasis added.) What the Supreme Court has done here is, instead of creating a clear rule to follow like they did with “enhanced wages are okay,” they made an extremely fact intensive analysis, subject to lots of error for any employer who misses something in its calculation. Instead of creating a safe harbor, they’ve destroyed the jetty.

The IRS rate isn’t good enough, even though the DLSE and just about everyone else is happy with it. It may be highly impractical to ever conclusively show that the reimbursement is enough, given, as the court points out, the differences in makes and models of car, costs of insurance, fluctuating gas prices, etc.

The California Supreme Court also takes yet another shot at the DLSE, reminding us all that their Opinion letters carry no weight, except when they do.

On the surface, this appears to be a “pro-employer” opinion. It’s not–it’s a disaster, and it will make issues of proof very complicated in any 2802 case–maybe even per se summary judgment proof.

UPDATE:Is this an overreaction? It’s been pointed out to me that this doesn’t change much, except perhaps eliminating the former presumption that the IRS rate was ok. I see every Supreme Court case as being a bad result if it doesn’t give a good rule to follow, because so few cases make it that far. By not viewing the world through the lens of black and white, there are those out there who want to comply–if they just knew how.