On January 1, 2023, the IRS mileage rate increased to 65.5 cents per mile for driving done for business purposes.  This is a three (3) cent increase from the rate set for the second half of 2022.  According to the IRS, this rate applies “to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles” and was calculated “based on an annual study of the fixed and variable costs of operating an automobile.”

As a reminder, California Labor Code section 2802(a) requires employers to reimburse employees “for all necessary expenditures or losses incurred…in direct consequence of the discharge of [their] duties…”  Employees operating their vehicles for business purposes trigger expense reimbursement obligations under California Labor Code section 2802(a).  Failure to reimburse business expenses can give rise to lawsuits which may result in significant penalties and attorneys’ fees.

Employers should ensure they are updating their policies and practices to reflect reimbursement of the new mileage rate in order to avoid costly consequences down the line.  While the IRS mileage rate is deemed reasonable by the Division of Labor Standards Enforcement (DLSE), this is not the only permissible way to reimburse vehicle-related business expenses in California, as long as employees are being fully reimbursed for their expenses.  Employers are encouraged to reach out for assistance in updating their expense reimbursement policies and practices.