When the pandemic started, we sent many of our employees home to work remotely. Should we have a policy regarding reimbursement of their expenses?
Note: Read more about a 2023 court case related to this issue.
The unexpected and rapid growth of remote workers since 2020 has changed the workplace permanently. Amid the chaos, employers needed to think about increased use of home internet, more personal cell phone usage, home office enhancements and other expenditures necessary to work from home successfully. Remote work is not going away.
Under California Labor Code Section 2802, employees are entitled to be reimbursed by their employers “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.” Section 2802 is interpreted and applied broadly to prevent employers from passing on business costs to employees.
Work from home expenses can be challenging to measure and apportion. Nevertheless, employers must monitor the expenses incurred by employees. By law, employers must ensure that all expenses “necessary” to perform the job remotely are reimbursed.
Employees working from home may see their utilities bills rise because they are using more electricity and need to adjust their climate control systems to be comfortable. A remote employee might have their own print/scan/copy machine that is being used significantly more because of the remote work.
California courts have interpreted “necessary expenses” to include a reasonable percentage of an employee’s monthly internet bill for work-related uses, even when the cost of the employee’s internet plan is fixed.
In Cochran v. Schwan’s Home Service, Inc. (228 Cal. App. 4th 1137 (2014)), a California court of appeal ruled that an employer must reimburse an employee if the employee is required to use a personal cell phone to make work-related calls, even when the employee did not incur an extra expense because they had an unlimited data plan.
The court in Stuart v. RadioShack Corporation (641 F.Supp.2d 901 (N.D. Cal. 2009)) ruled that employers cannot wait for an employee to submit a formal reimbursement request. “Once an employer knows or has reason to know that the employee has incurred an expense, then it has the duty to exercise due diligence and take any and all reasonable steps to ensure that the employee is reimbursed for the expense.”
Failure of companies to recognize that remote employees are paying out of their own pockets while working remotely already has led to serious consequences for employers.
A significant number of class action and Private Attorneys General Act (PAGA) lawsuits have already been filed seeking expense reimbursements, penalties and even attorney fees, and more are sure to be on the horizon.
The lawsuits include usual claims such as a failure to reimburse telephone and internet expenses and the cost of other office supplies. Some lawsuits, however, also include more novel claims for expenses such as utilities costs to heat or cool a house and even lost revenue for employees who say they could have rented out the space in their home instead of using it as a home office.
The pandemic and subsequent remote work happened so suddenly that many employers had no policies in place regarding expenses associated with working from home, which is driving much of this litigation.
Employers need to determine what expenses are being shouldered by remote workers and whether they are being reimbursed. Creating and implementing a reimbursement policy for remote work expenses also may be appropriate.
Employers should review their current reimbursement policies in consultation with legal counsel to make sure that all reimbursement obligations are being met.
The California Employee Handbook Creator Online Tool offers sample policies for subscribers. Each sample policy allows the user to choose from options to create the subscriber’s custom employee handbook.
For more information, CalChamber Preferred and Executive members can submit a question to CalChamber’s Labor Law Helpline. CalChamber members can read more about Remote Workers/Telecommuters in the HR Library. Not a member? See what CalChamber can do for you.