The short answer: it depends on where you work and whether the unpaid expense pushes your effective pay below the legal minimum. There is no broad federal law that forces every employer to reimburse ordinary business expenses or mileage. But several states, most notably California and Illinois, do require it, and even where no state mandate exists, federal law steps in when an out-of-pocket cost drags your earnings below the minimum wage. So an employer can sometimes refuse, but often cannot, and the rules vary by state.
The Federal Baseline: The FLSA and the "Kickback" Rule
The Fair Labor Standards Act (FLSA), enforced by the U.S. Department of Labor Wage and Hour Division (WHD), does not contain a general right to expense reimbursement. There is no federal statute that simply says "employers must pay back mileage." For many salaried, well-paid workers, that means a refusal to reimburse is not by itself a federal wage violation.
The important exception is what regulators call the anti-kickback rule. Under FLSA regulations, an employer may not require workers to bear business costs if doing so cuts their pay below the federal minimum wage (currently $7.25 per hour) or eats into overtime pay owed. The idea is that you cannot legally "kick back" part of your wages to your employer by covering the company's expenses for free.
This matters most for lower-wage and tipped workers. Classic examples include:
- Delivery drivers who use their own cars and are paid at or near minimum wage. If unreimbursed gas and wear-and-tear push their real hourly rate below $7.25, that is a federal violation.
- Employees required to buy tools, uniforms, or equipment that primarily benefit the employer, where the cost reduces pay below minimum wage.
- Workers who must cover cash shortages, register drops, or customer walk-outs out of their own pockets.
The Wage and Hour Division does not require employers to use the IRS standard mileage rate. They allow either tracking actual vehicle costs or using a "reasonable approximation," and the IRS rate is one accepted shortcut. The legal question is whether enough is reimbursed to keep effective pay above the minimum, not whether a specific per-mile figure was used.
Where State Law Goes Further
This is where most reimbursement rights actually live, and it varies significantly by state. A handful of states require employers to reimburse all necessary business expenses, regardless of how much the worker earns.
California
California Labor Code Section 2802 is the strongest and most litigated reimbursement law in the country. It requires employers to reimburse employees for all necessary expenditures incurred in carrying out their job duties. This commonly includes business mileage, a reasonable share of personal cell-phone bills used for work, internet costs for remote work, and required equipment. California is the engine behind many reimbursement class actions, and the right cannot be waived by agreement.
Illinois
Illinois amended its Wage Payment and Collection Act to require reimbursement of necessary expenses directly related to the job and within the scope of employment, subject to the employer's written expense policy. Employers can set reasonable rules and documentation requirements, but cannot simply refuse to pay legitimate, necessary costs.
Other States
Several other states, including Massachusetts, Montana, New Hampshire, North Dakota, South Dakota, Iowa, Pennsylvania, New York, and the District of Columbia, have laws or regulations that require reimbursement of certain business expenses or that protect wages from employer deductions. The exact scope, covered expenses, and enforcement differ in each one. Because these rules change and vary so much, check your specific state labor department rather than assuming a national standard applies. This varies by state, and a refusal that is perfectly legal in one state may be illegal in the next.
What About Mileage Specifically?
Mileage is just one type of business expense, so it follows the same framework. There is no federal law setting a required reimbursement rate. The IRS publishes a standard mileage rate each year, but that figure is a tax deduction and accounting tool, not a wage mandate. An employer is generally free to reimburse at the IRS rate, above it, below it, or in some states not at all, subject to two limits:
- The reimbursement (or lack of it) must not drop a worker below minimum wage under the FLSA kickback rule.
- It must satisfy any state law, like California's, that requires full reimbursement of necessary driving costs.
One practical note: if your employer reimburses at the IRS rate or below, that reimbursement is usually tax-free to you. Amounts paid above the IRS rate, or paid without tracking actual business miles, can become taxable income.
What About Per Diem?
Per diem is a flat daily allowance for travel costs like meals and lodging. No federal law requires private employers to pay per diem at all. It is generally a matter of company policy or your employment contract. The federal government publishes per diem rates (through the GSA) for its own employees and for tax-substantiation purposes, but private employers are not bound to those numbers.