Employees who need to drive frequently for their jobs can use their personal vehicles instead of a company car. But you may be surprised to learn your company could be held liable if they act negligently and injure someone while on the job. This is called vicarious liability, and it’s important to know how to protect your company from it.
[Read more: How to Manage Company Vehicle Usage and Maintenance]
How to protect your company from liability
If your employees need to drive for work-related activities and you can’t provide company cars, they may have to use their own vehicles. Fortunately, you can take steps to keep your employees safe and minimize your company’s liability.
Check your employee’s driving history
Before you send one of your employees out to run a work-related activity, you should ensure that it’s appropriate for them to be driving in the first place. Make sure they have a current driver’s license, motor vehicle safety inspection certificate, and proof of insurance. At the very least, every employee must have liability coverage that meets the minimum requirements in your state.
It’s also a good idea to review their motor vehicle record (MVR) to ensure that it’s acceptable and there are no red flags. Make copies of these documents and keep them in a file for your employees—this demonstrates that you did your due diligence as an employer.
Develop a clear vehicle use policy for your business
It’s also important to have company policies around driving for work. Here are some examples of policies you could put in place:
- Employees shouldn’t be driving if they’re intoxicated or using other controlled substances that could impair their ability to operate a vehicle.
- Employees won’t text, talk on the phone, or operate any electronic equipment while driving.
- Employees agree not to let their insurance coverage lapse for any reason.
- If an accident occurs, the employee will immediately let their employer know about it.
Once you’ve completed your employee driving policy, have your employees review and sign the document. Their signature ensures that everyone understands the expectations around driving for work-related tasks. Of course, having your employees agree to a driving policy isn’t enough — you should also enforce it to the best of your ability.
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Even if it isn’t a requirement in your state, you should consider reimbursing your employees for any miles driven for business purposes.
Review the insurance requirements for employees using personal vehicles
Next, you should review the insurance requirements for employees using personal vehicles for work. Ask all employees to provide proof of insurance coverage before using their personal vehicles for work.
However, meeting the minimum coverage requirements doesn’t usually provide enough protection, so you’ll want to purchase additional coverage. One option is to purchase hired and non-owned auto coverage. Hired coverage protects you when the company or the driver doesn’t own the vehicle, like an employee driving a borrowed or rented car.
Non-owned auto coverage protects your company from liability when employees use their own cars for work. If an employee gets in an accident, their auto insurance will be activated first, and the company policies can supplement it.
Consider reimbursement options for employees who drive their own vehicles
Federal law doesn’t require you to reimburse employees who drive their vehicle for work, though individual states may. But even if it isn’t a requirement in your state, you should consider reimbursing your employees for any miles driven for business purposes. Not only will your employees appreciate it, but you can claim this benefit as a tax deduction.
In 2025, the standard mileage reimbursement rate is 70 cents per mile. So if an employee drove 100 miles during their last pay period, you’ll reimburse them for $70. If your employees track their mileage through an expense management platform, you’ll receive the expense reimbursement automatically and can deposit the reimbursement directly into their paychecks.
[Read more: How to Track Company Vehicle Use as a Small Business]
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