When Is Per Diem Required Under California Law?

California law does not require employers to pay per diem by name, but it does require them to reimburse employees for all necessary business expenses under Labor Code Section 2802. Per diem is simply one common way employers meet that duty. The important consequence for you: a flat daily allowance is not a ceiling, and if your real, reasonable expenses run higher than what your employer pays, you are owed the difference.

What Section 2802 Actually Requires

Labor Code Section 2802 is the statute behind every per diem question in California. It requires an employer to indemnify employees for all necessary expenses or losses they incur as a direct result of doing their job or following the employer’s directions.¹ The language is deliberately broad. It reaches hotel rooms on business travel, meals during overnight trips, mileage on your personal vehicle, cell phone bills for work calls, and essentially any cost your employer’s operations push onto you.

Two features of the statute give it real force. Any contract or policy that tries to waive your reimbursement rights is void, so an employer cannot ask you to sign the obligation away. And if you have to enforce the statute in court or through a wage claim, you can recover your attorney’s fees and costs on top of the unpaid amount.¹ That fee-shifting rule is what makes small expense claims economically viable to bring.

One boundary worth stating up front: Section 2802 protects employees. If you work as a 1099 independent contractor, the statute does not apply to you, and reimbursement is governed by your contract with the client and ordinary tax rules on Schedule C.²

Per Diem Is Not a Cap on What You’re Owed

This is the point employers and employees most often get wrong. Paying a flat per diem does not automatically satisfy Section 2802. Per diem is a convenience, not a cap. If your employer gives you $68 a day for meals and you are working in San Francisco where that barely covers two meals, you are entitled to reimbursement for the reasonable shortfall. The statute’s “all necessary expenditures” standard cannot be sidestepped through a flat allowance that systematically underpays actual costs.

California appellate courts have taken the same view in related contexts, holding that employers owe reimbursement for business use of a personal cell phone even when the employee’s plan cost did not go up. The duty to reimburse is not limited to out-of-pocket increases, and it is not satisfied by a payment that stops short of the real expense.

The practical takeaway: keep records. Save receipts, note what you spent and where, and compare the totals against what your employer paid you. If you consistently spend more than your per diem on reasonable, necessary business expenses, you have a legal basis to ask for the balance.

What Per Diem Typically Covers

Per diem in California almost always addresses three categories of travel cost: lodging, meals with incidentals, and mileage on a personal vehicle. Each has its own benchmark rate.

Lodging

Lodging per diem covers hotels, motels, extended-stay properties, and short-term rentals when conventional lodging is unavailable. Many employers use the federal General Services Administration rates as their benchmark. California’s expensive cities sit well above the national standard. For fiscal year 2026, the standard CONUS lodging rate is $110 per night, Los Angeles County is $191, and San Francisco is $259.³ An employer using GSA rates should match the rate for your actual destination, not default to the standard rate when sending you somewhere expensive.

Meals and Incidental Expenses

The meals and incidental expenses rate, abbreviated M&IE, covers breakfast, lunch, dinner, and a small allowance for tips to porters, baggage carriers, and hotel staff.⁴ The standard federal M&IE rate for fiscal year 2026 is $68 per day. California cities run higher. Los Angeles, for example, carries an $86 daily rate, broken down as $22 for breakfast, $23 for lunch, $36 for dinner, and $5 for incidentals.³ First and last days of travel are paid at 75 percent of the full daily rate.⁵

Mileage

When you drive your personal vehicle for work beyond your normal commute, mileage falls under Section 2802. Most California employers reimburse at the IRS standard mileage rate: 72.5 cents per mile for 2026, up 2.5 cents from 2025.⁶ California law doesn’t require that specific number, but an employer paying substantially less would have a hard time showing the amount actually covers your cost of operating a vehicle.

The IRS High-Low Shortcut

Some employers skip location-by-location lookups and use the IRS high-low method instead. Under IRS Notice 2025-54, the rates effective October 1, 2025, are $319 per day for high-cost localities and $225 per day for everywhere else in the continental United States, with $86 and $74 of those amounts allocated to meals.⁷ San Francisco, Los Angeles, and San Diego all qualify as high-cost localities. Whichever method the employer picks, the California shortfall rule still applies: if your actual reasonable expenses exceed the per diem, Section 2802 requires the difference.

Will Per Diem Show Up as Taxable Income?

Whether per diem lands in Box 1 of your W-2 depends on how your employer structures the arrangement. The IRS recognizes two types of plans.

An accountable plan keeps per diem out of your taxable wages. To qualify, the arrangement must have a business connection, you must substantiate the time, place, and business purpose of the travel, and you must return any excess reimbursement within a reasonable period.² A per diem at or below the federal rate satisfies the dollar-amount substantiation requirement as long as you document when, where, and why you traveled. IRS safe-harbor rules give you 60 days after an expense to substantiate it and 120 days to return anything above what you can document.⁸

A nonaccountable plan, or any portion of a per diem that exceeds the federal rate without proper substantiation, becomes taxable wages subject to income tax withholding and payroll taxes.² If your employer pays $350 per day where the GSA rate is $277, the extra $73 is taxable income unless you can document that you spent the full amount on legitimate business costs.

What to Do If Your Employer Won’t Pay

Section 2802 carries real consequences for employers who ignore it. Unpaid reimbursements accrue interest at the civil-judgment rate from the date you first incurred the expense, not from the date of any court order. You can recover attorney’s fees and costs if you have to enforce the statute. The Labor Commissioner can also issue citations directly against noncompliant employers using the same enforcement machinery that applies to minimum-wage violations.¹ A separate Private Attorneys General Act claim can add penalties of $100 per employee per pay period for initial violations and up to $200 per pay period for subsequent or malicious ones.

If informal requests fail, you can file a wage claim with the California Division of Labor Standards Enforcement, known as the Labor Commissioner’s Office. Unreimbursed expenses go through the same wage-claim process as unpaid wages, and the filing deadline is three years.⁹ The process runs in three stages:

You submit a claim form online, by email, by mail, or in person, along with documentation of the expenses, the per diem paid, and receipts showing what you actually spent.
The office schedules a settlement conference where you and your employer try to resolve the dispute.
If no settlement is reached, a hearing officer takes evidence and issues a binding decision.

You can skip the administrative process and sue in civil court instead. Some employees pursue claims under California’s unfair competition law, which carries a four-year statute of limitations rather than three. Either path depends on the same thing: documentation. Keep every receipt, itinerary, email, and expense policy. The strength of a per diem shortfall claim almost always comes down to what you can prove you spent.

1
California Legislative Information. California Labor Code LAB 2802
2
Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
3
GSA. FY 2026 Per Diem Rates for California
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GSA. Frequently Asked Questions, Per Diem
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eCFR. 41 CFR Part 301-11 – Subsistence Expenses
6
Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents per Mile, Up 2.5 Cents
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Internal Revenue Service. 2025-2026 Special Per Diem Rates
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eCFR. 26 CFR 1.62-2 Reimbursements and Other Expense Allowance Arrangements
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California Department of Industrial Relations. How to File a Wage Claim