Can Your Employer Require You to Pay for Parking?

When employers require employees to pay for parking, even in a lot owned by the employer, many workers question whether such a policy is legal.

The short answer is yes. Employers can require employees to pay parking fees.

This article explains the factors that influence workplace parking policies and why some employers require employees to pay for parking.

Is it Legal for Companies to Charge Employees for Parking Spots?

No federal or state law requires employers to provide parking spots for employees, let alone free parking. Some employers offer free parking as an employment incentive. However, the decision remains with the employer.

The legal implications of parking management also vary depending on whether the employer owns or rents the parking lot through a third-party facility.

When Employers Own the Parking Lot

Employers who own the parking facility maintain complete discretion over its use. This includes:

• The right to charge employees for parking access
• Authority to set parking rates and policies
• Responsibility for maintenance and security costs

In some cases, employees can park for free in employer-owned parking spots. However, many employers justify the parking fees by citing maintenance expenses.

Industry research suggests the annual cost of maintaining structured parking space (like a parking garage) can reach up to $3,500 per space. This includes the cost of construction, land, and operating costs.

Meanwhile, parking space maintenance can range from $167 to $447 per space. In urban areas, monthly parking rates can range from $100 to over $500 per space. This creates significant overhead costs for employers.

Before the 2017 Tax Cuts and Jobs Act (TCJA), businesses could claim a tax deduction for employee parking space costs. However, the TCJA eliminated these deductions, forcing employers to bear the full cost of providing free parking.

When Employers Lease Parking Facilities

If the employer leases parking from a third party, charging for employee parking becomes more understandable. The employer faces regular expenses for the leased parking spaces. They may pass these costs to employees and other car park users. Employers may also reimburse some of the cost and provide their employees with parking permits.

Legal Considerations Related to Employee Parking Fees

Parking issues can create legal disputes. With this, it is important to understand the laws and policies related to employee parking rights.

Employment Contracts and Handbooks

Your employment contract or employee handbook may address parking arrangements. Review these documents before assuming your employer will cover your parking fee. You can also consider the following questions:

• Was free parking promised during your hiring process?
• Does your employment contract mention parking benefits as a perk?
• Have there been recent policy changes regarding employee parking?

For instance, your employer promised free employee parking during the hiring process. If the employer mentioned free parking as part of your compensation package. Then, you might have a legal claim. An employment attorney can help determine your grounds for filing a claim on a case-by-case basis.

ADA Requirements

The Americans with Disabilities Act (ADA) affects parking considerations for employees with disabilities. Under the ADA, employers should interactively consider “reasonable accommodations.” A reasonable accommodation may include changing or adjusting a job or work environment. It should allow the employee to perform their job functions and privileges of employment equal to those enjoyed by all employees.

Some of the key points related to accessible parking spaces include the following:

• If an employer provides parking spaces to all employees, it should include accessible parking spaces.
• Making facilities “readily accessible” includes non-working activity spaces, such as lunch areas, break rooms, bathrooms, and parking facilities.

The Court and EEOC guidelines recognize employers' obligations to furnish reasonable accommodations to their employees. In Feist v. State of Louisiana, the Fifth Circuit Court of Appeals ruled that providing an on-site reserved parking space could make the workplace more accessible and usable to an employee with a disability.

Tax Implications for Employer-Provided Parking

If an employer does provide free parking, there can be tax issues involved. The Internal Review Service (IRS) views "employer-provided parking" as a fringe benefit that can, at a certain point, be subject to taxes.

Employer-provided parking includes any of the following:

• A parking space that the employer pays for directly to the operator of the parking lot
• A reimbursement provided by the employer for the employees’ parking expenses
• A parking space on employer-owned property or a property that the employer leases

Generally, employers must include the market value of fringe benefits on employee pay documents. Those benefits are subject to employment taxes and are reported on your W-2. This includes employer-provided parking.

But, some parking benefits can be excluded from taxable pay. The amount changes each year. For 2025, employers can provide tax-free parking benefits equal to up to $325 a month.

The Tax Cuts and Jobs Act (TCJA) of 2017 significantly changed the tax treatment of employer-provided parking spaces. Before TCJA, businesses could deduct employee parking space costs as business expenses. However, TCJA eliminated these tax deductions.

The passage of TCJA removed the tax advantages employers once enjoyed. It created a situation where employers bear the full costs of providing free parking. The Act made subsidizing employees' parking fees more expensive.

Some employers responded by increasing parking fees. Meanwhile, other employers started offering alternative transportation benefits such as public transportation subsidies or perks for carpooling. These alternative transportation options often still qualify as business deductions.

Seek Legal Advice from an Employment Attorney

If you have legal questions about your employer's parking area policies, seek legal advice. An employment attorney can help you understand your legal issues and find the best recourse. They can also review your employment contract and look at legal remedies available to you.