For many California employees, especially those who travel frequently for work, per diem pay can be an important part of their compensation package. Per diem is intended to reimburse employees for daily expenses such as meals, lodging, and incidentals while working away from home.
However, per diem rules are often misunderstood, and in some cases employers misuse per diem to reduce overtime or underpay workers. Understanding how per diem pay works under California labor laws can help employees determine whether their compensation is being calculated correctly and lawfully.
What Is Per Diem Pay?
Per diem pay refers to a fixed daily allowance that covers business-related travel expenses, such as meals, lodging, incidentals expenses (parking, tips, minor travel expenses), mileage/transportation costs, and any other necessary travel-related expenses. Per diem pay is not considered wages or salary, but rather, a means to reimburse employees for expenses they incur while performing work-related travel.
Does Per Diem Affect Overtime in California?
Per diem should not affect overtime calculations. An employee’s regular rate of pay must include hourly wages, bonuses, shift differentials, and non-discretionary incentives. If an employer uses per diem payments to reduce your calculated overtime rate, this may be a potential wage-and-hour violation under California law.
How Per Diem Pay Works in California
While California doesn’t set its own unique per diem rates, employers may set internal per diem policies, or they may rely on the federal GSA per diem rates, which can vary by county and season. Under California Labor Code § 2802, employers must offer reimbursement for all necessary business expenses including travel and lodging.
Is Per Diem Taxable in California?
In many cases, per diem payments are not taxable when the employee provides proper documentation showing the time, place, and business purpose of the travel and when the per diem amount does not exceed federal GSA rates. When receipts are not required, per diem payments must still comply with IRS “accountable plan” rules in order to remain non-taxable.
However, if per diem is treated as regular income rather than reimbursement, it may be considered taxable wages. Improper classification or taxation of per diem payments can also raise wage-and-hour or IRS compliance issues.
Common Employer Violations Involving Per Diem
Unfortunately, some California employers misuse per diem to cut labor costs. As a result, employees lose overtime pay, meal breaks, rest breaks, or reimbursement for work related expenses. Some of the most common violations include:
- Using per diem to artificially reduce the regular rate of pay
- Paying high per diem instead of wages
- Failing to reimburse expenses that exceed the per diem
- Not paying overtime correctly
- Misclassifying employees (e.g., as independent contractors) and avoiding reimbursement
- Requiring employees to pay for travel costs out of pocket
- Not issuing accurate pay stubs showing per diem separately
If an employer conducts any of these practices, it violates several state labor codes such as California Labor Code § 2802 (expense reimbursement), § 510 (overtime laws), and § 1194 (minimum wage). Any employees who experience these issues may be owed compensation.
What Should Employees Do If Their Per Diem Has Been Miscalculated?
Employees may be able to file a wage and hour theft claim. An experienced California employment lawyer can assess your situation, review pay stubs, and determine whether your rights were violated.
When to Speak With a California Employment Lawyer
Employees should contact an employment attorney if they notice any of the following patterns:
- Per diem amounts are inconsistent
- They pay out-of-pocket for work travel
- Their overtime pay seems unusually low
- They were disciplined for submitting receipts
- Their employer is disguising wages as per diem
- Their employer refuses to reimburse legitimate expenses
If you believe your employer misused per diem pay or failed to reimburse their expenses properly, the experienced employment attorneys at Lawyers for Justice, PC can help. The firm investigates employer misconduct and fights for compensation including lost wages, benefits, and emotional distress.
Contact the firm’s legal team at 818-JUSTICE or fill out the online contact form today for a free consultation. Our Wage and Hour attorneys are available 24/7 for consultations.
Frequently Asked Questions About Per Diem Pay in California
What is per diem pay in California?
Per diem pay is a fixed daily allowance that employers provide to reimburse employees for work-related travel expenses such as meals, lodging, transportation, and incidental costs. Per diem is intended to cover expenses incurred while performing job duties and, when properly structured, is generally not considered wages or salary.
Does per diem count toward overtime pay in California?
No. Per diem should not be used to reduce an employee’s regular rate of pay or overtime calculations. Overtime must be based on wages, bonuses, and other non-discretionary compensation. If an employer uses per diem payments to lower overtime pay may, it may violate California wage and hour laws.
Are employers required to reimburse expenses beyond per diem?
Yes. Under California Labor Code § 2802, employers are required to reimburse employees for all necessary business expenses incurred in the course of their work. If an employee’s actual travel or work-related expenses exceed the per diem amount provided, the employer may still be required to reimburse the difference.
Is per diem taxable income in California?
Per diem payments are generally non-taxable when they comply with IRS accountable plan rules and do not exceed federal GSA rates. However, if per diem is paid without proper documentation, exceeds allowable limits, or is treated as regular income rather than reimbursement, it may become taxable and could also raise wage-and-hour compliance concerns.
What should employees do if their employer misuses per diem pay?
Employees should start by reviewing their pay stubs, tracking out-of-pocket expenses, and gathering any documentation related to travel, reimbursements, and compensation. If per diem pay appears to be used to replace wages, reduce overtime pay, or avoid proper reimbursements, speaking with a California employment attorney can help determine whether wage theft or other labor law violations may have occurred.