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August 2022

California Employers: Guidance for COVID-19 Remote Work Reimbursement Expenses

As the COVID-19 pandemic recedes, California employers are witnessing a new wave of employee class actions. These lawsuits seek reimbursements for employee expenses accrued while working from home during the pandemic – telephone, internet, and even electricity. The California law requiring employers to reimburse employees for expenses is broad; making it essential that employers pay attention to employees’ expenditures and properly reimburse them to avoid unnecessary and expensive litigation.

California Labor Code section 2802 mandates that employers indemnify employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties….”  In order to prevail on a claim for reimbursement, an employee must show: (1) they incurred necessary expenditures; (2) these expenditures were incurred in the discharge of their duties; (3) the employer know or reasonably should have known of the expenditures; and (4) the employer did not exercise due diligences towards reimbursement. Courts have interpreted this law broadly.

Due to the broad language in section 2802, employers need to have a firm understanding of the far reaching implications that this law requires.

Consider the following scenario:

Joe began working remotely in March 2020 when the state issued the stay-at-home order. He used a company issued laptop and his home internet and electricity. He also used his personal cellphone to make work calls but he had an unlimited calling plan and unlimited data so he accrued no additional costs in using his cellphone. Joe’s company provided him with pens and paper to work with but Joe preferred a different type of pen so he went and purchased additional pens for his use.

Joe had many zoom calls with clients and purchased a new suit for these calls since his company required he wear business attire for such meetings. While still working from home Joe had to drive to his post office to ship packages to clients and paid for parking. Joe requested reimbursement from employer for the shipping costs of the packages but did not tell his employer about the parking costs. His employer added the costs of the packages to Joe’s regular pay.

After returning to the office in late 2021, Joe asked his employer to reimburse him for all the expenses he accrued while working from home.

There are 6 potential reimbursements in the above scenario

  1.   Joe’s home internet and electricity
  2.   Joe’s cellphone with the unlimited plan
  3.   The additional pens
  4.   Joe’s new suit
  5.   Parking costs
  6.   Not separately reimbursing Joe for the shipping.

What does Joe’s employer have to reimburse him for?

Joe’s employer must reimburse him for the use of his cellphone even though Joe had an unlimited plan. In Cochran v. Schwan’s Homer Service, Inc. (2014) 228 Cal.App.4th 1137, an employee’s use of her cellphone for work required reimbursement, even though the employee had an unlimited plan which ensured that there was no extra expense to the employee. The Court observed that “reimbursement is always required.” The Court noted that it would be a windfall to an employer to pass its operating expenses on to its employees.

Joe’s employer does not have to reimburse him for the pens or the suit. An employer is only required to reimburse employees for necessary expenses. Joe’s employer provided him with pens so he did not need to purchase additional pens to conduct his work.

Joe will claim that he had to purchase a suit because his company required him to have business attire for meeting with clients. However, an employer is only required to reimburse an employee for clothing purchases if they are a company uniform or protective material required by OSHA. (Lemus v. Denny’s Inc., supra, (9th Cir. 2015) 617 F. App’x 701.) Joe’s suit does not meet this requirement.

Joe’s employer does not have to pay him for the parking unless it had knowledge of the expense or reasonably should have had knowledge of it. In Stuart v. RadioShack Corp. (N.D. Cal. 2009) 614 F.Supp.3d 901, RadioShack successfully defended itself from a claim for reimbursement because there was no evidence to establish that it knew about the expenses its employee had accrued. This knowledge was the key to whether RadioShack had an obligation to reimburse its employees as the Court reasoned that an employer does not have a duty to reimburse its employees unless it has knowledge that the employee has incurred the expense. Here, Joe did not disclose the parking expense so his employer does not have to reimburse for expenses it did not know of.

Joe’s employer has the option to reimburse Joe in whatever manner it wishes so adding the reimbursement to Joe’s regular paycheck is acceptable. The method of reimbursing an employee does not matter so long as the employee is properly compensated. (See Gattuso v. Harte-Hanks Shoppers, Inc., supra, 42 Cal.4th at 570, 575) (Section 2802 does not restrict methods used to calculate reimbursement and a payment which is workable and reasonable is proper.)

The big question that employers are waiting on is whether Joe should be reimbursed for home electricity and internet. There is a current pending case, Williams v. Services, LLC in the federal district court for the Northern District of California, which deals with this issue. (Williams v. Services, LLC (N.D. Cal.) Case No. 22-cv-01892-VC.) There has not yet been a final judgment on the merits and a likely appeal will follow, but upon resolution, this case will provide guidance as to whether these expenses are reimbursable.

What can employers do to avoid expensive litigation over reimbursement claims like Joe’s?

California employers should adopt policies regarding reimbursement, including that employees must submit all claims for all costs employees accrued in the performance of their duties. They should also set up methods for purchasing work items through the company so that employees are not making purchases on their own.

Employers should also determine whether employees are using personal items for work. If so, they should either issue these items through work or offer up a small stipend to cover the use of these materials. 

Employers must be mindful when reimbursing employees. Otherwise they will face the same wave of PAGA cases that are sweeping through California. A fate which can be avoided with careful management and solid policies and practices.

For more information, contact your Gordon & Rees employment law attorney. Learn more about the employment law practice group here

San Diego Law Clerk, Allison Harvey, contributed to this publication, 

Employment Law

Employment Law