On September 9, 2005, the IRS announced that it will increase the mileage rate to 48.5 cents a mile for the final four months of 2005. The mileage rate was set at 40.5 cents a mile for the first eight months of 2005, but due to the quickly rising gas prices the IRS took steps to change the rate. The IRS said it will not set the 2006 rate until closer to January and noted that next year's rate could be lower than 48.5 cents. Click here for the IRS announcement.
This is important for California employers because the California Labor Code section 2802 provides:
An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.
Under this section, a California employer must pay an employee for the cost of the use of his or her vehicle within the course and scope of employment. The Division of Labor Standards Enforcement has stated that use of the IRS mileage allowance will satisfy the expenses incurred in use of an employee's car in the absence of evidence to the contrary.
