Which States in the US Require Mileage Reimbursement?

Mileage reimbursement in California

California requires employers to reimburse their staff for work-related mileage. Regulations regarding employee reimbursements can be found in the California Labor Code section 2802.

The document states that employers are obligated to reimburse employees for any expenses or losses directly resulting from the responsibilities at a given position or as a consequence of the employer's orders. It includes each time an employee is required to use their own vehicle to perform work-related duties. The important exception, of course, is daily commuting, which is legally considered personal travel.

Employers have a couple of options to compensate employees for driving on the clock:

• Cents-per-mile (CPM) reimbursements based on the IRS standard mileage rate (67 cents per mile in 2024)
• The actual expense method
• Lump-sum payments/car allowance
• Fixed and Variable Rate Reimbursement (FAVR) method

Each method has its own set of rules and conditions, giving both the employer and employee flexibility.

Cents-per-mile (CPM) reimbursement is the most common method in California because it provides a straightforward and consistent way to ensure fair and legally compliant reimbursements. This approach eliminates the need to track and reimburse individual expenses such as gas, oil changes, or repairs, which can be time-consuming and administratively burdensome. 

It’s also fair to point out that using the CPM method ensures companies don’t violate California Labor Code section 2802 by providing reimbursement according to the constantly adapting IRS rate. 

Alternatively, employers can choose to make lump-sum payments or use the FAVR method. The latter considers both fixed and variable costs and ensures the most accurate vehicle reimbursements — however, this accuracy is often difficult to maintain since the process involves so much record-keeping. It’s also more costly and requires many more labor hours than the CPM method.

Find out more about Mileage Reimbursement in California in our guide.

Mileage reimbursement in Massachusetts

Mileage reimbursements in Massachusetts are mandatory according to the Minimum Fair Wages Act. The specific regulation in the 454 CMR clarifies that employers must reimburse employees for work-related transportation expenses incurred during the work day. That may include mileage reimbursement as well as parking fees, tickets, and other necessary expenses.

If workers are required to report to a location other than their regular worksite, businesses also must reimburse them for transportation expenses and any travel time that exceeds their usual commute. Of course, to receive the reimbursement, employees must provide sufficient documentation regarding mileage and other possible expenses. 

A company that doesn’t provide fair reimbursements may be in violation of state wage and hour laws and can face legal action. 

However, it’s necessary to point out that certain professions that involve extensive travel may not qualify for mileage reimbursement if the employee's compensation structure already accounts for travel expenses. Additionally, employees classified as independent contractors rather than employees may not be entitled to mileage reimbursement under the same legal standards.

Find out more about Mileage Reimbursement in Massachusetts in our guide.

Mileage reimbursement in Illinois

Employee mileage reimbursement regulations in Illinois can be found in the Illinois Wage Payment and Collection Act (820 ILCS 115/9.5). According to the document, businesses are required to pay their employees for:

“all necessary expenditures or losses incurred by the employee within the scope of employment and directly related to services performed for the employer.”

The regulation applies to all business travel except regular commuting from and to work, which is legally considered personal. Additionally, employers aren’t required to reimburse for expenses caused by the employee’s negligence, normal wear and tear, or theft unless it resulted from the employer’s negligence. Tax-free reimbursements can be provided using the CPM method or actual expenses. 

If an employer fails to provide mileage reimbursement, employees may file a complaint with the Illinois Department of Labor (IDOL) or pursue legal action through the court system. As a result, employers may be liable for unpaid reimbursements, plus penalties and interest. 

However, employers can reject a reimbursement claim in certain situations. For example, if an employee hasn’t provided a complete mileage log or hasn’t used a mileage-tracking app provided by an employer, a reimbursement claim may be legally rejected. Similarly, a claim can be rejected if an employee cannot provide receipts when the company's reimbursement policy is based on an actual expense method.

Find out more about Mileage Reimbursement in Illinois in our guide.

Tools for handling mileage reimbursement

Mileage reimbursements used to be quite a chore for businesses, especially those whose employees need to travel frequently. However, with tools like the MileIQ for Teams, a massive part of the entire process can be simplified and largely automated. 

The app not only takes care of tracking but also calculates reimbursements and creates documentation ready for the IRS. Employers can also approve mileage without having to sift through different reports and set a commute distance that deducts automatically. This makes remaining compliant significantly easier and helps build trust and transparency with employees.

For employees, MileIQ provides:

• A simplified method for recording mileage
• A way to claim reimbursements without manual logging or lost receipts
• An easy way to approve mileage with a click — no need for spreadsheets, all mileage data is already in place and admins see business drives only

Mileage reimbursements in other states

Even though only California, Massachusetts, and Illinois have laws that require employers to provide compensation for employees using their vehicles for work-related reasons, it’s not uncommon for companies in other states to have such programs. 

Businesses across the US have also have their own programs that guarantee mileage reimbursements and other compensation plans for employees using their cars. This method is often much more appealing to companies that don’t want to manage their own fleet of vehicles, making employee compensation programs a perfect alternative. 

Regardless if the reimbursements are mandatory or not, it’s always a good idea to take advantage of a mileage tracking app like MileIQ. That way, the process becomes much more straightforward.