Supreme Court Affirms Employer’s Ability to Reimburse Employee Business Expenses with Additional Income


On Monday, November 5, 2007, the California Supreme Court issued its long-awaited decision in Gattuso v. Harte-Hanke Shoppers, Inc., confirming an employer’s ability to satisfy its obligation under Labor Code section 2802 to reimburse employees for all their business expenses with

additional income. In Gattuso, the Supreme Court held nothing in Labor Code section 2802 precluded an employer from paying additional income to cover employee business expenses as long as there was an agreement containing a method or formula to determine how much of the

compensation was intended to cover employee business expenses. However, the additional compensation must be adequate, after taxes, to cover all of the business expenses incurred by the employee.

In our February 2007 Employment Law Commentary, we described the Gattuso decision as issued by the Court of Appeal. We also reviewed the Labor Commissioner’s proposed regulation dealing with how employers could satisfy their section 2802 regulations. Notably, these proposed

regulations prohibited reimbursement for employee business expenses with increased compensation. These regulations have not been finalized; the Labor Commissioner has until the end of December 2007 to issue them or they will expire.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:


Morrison & Foerster LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.