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Reimbursing Employee Business Expenses with Additional Income

By Lloyd W. Aubry, Jr.

On Nov. 5, 2007, the California Supreme Court issued its long-awaited decision in Gattuso v. Harte-Hanke Shoppers, Inc., S139555, confirming an employer's ability to satisfy its obligation under Labor Code ' 2802 to reimburse employees for all their business expenses with additional income. In Gattuso, the Supreme Court held that nothing in Labor Code ' 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.

The Gattuso Decision

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