Employers Must Reimburse Remote Workers for Business Expenses Incurred During Remote Work

Employers Must Reimburse Remote Workers for Business Expenses Incurred During Remote Work

California’s First District Court of Appeal issued an important decision regarding the reimbursement of business expenses for remote workers on July 11, 2023 in Thai v. International Business Machines Corp. (IBM) (2023), Cal.Rptr.3d.  The decision holds that California Labor Code § 2802 provides remote workers with the right to recover business expenses incurred from necessary remote work for the benefit of the employer, regardless of whether the employer chose to have the employees work from home.

Labor Code § 2082(a) requires an employer to reimburse an employee “all necessary expenditures … incurred by the employee in direct consequence of the discharge of his or her duties.” This action was brought under California’s Private Attorneys General Act (PAGA) to collect penalties for Section 2802 violations on behalf of the Plaintiffs, other similarly aggrieved employees, and the State of California. 

After Governor Gavin Newsome’s March 19, 2020 stay-at-home order at the outset of the COVID-19 pandemic, many companies transitioned to fully remote operations to comply, including IBM.  IBM employees purchased various services and pieces of equipment that were necessary to perform their jobs remotely, including telephone services, internet access, headsets, computers, and accessories for their computers.  Employees personally paid for these expenses and never received reimbursement from IBM — despite IBM knowing that employees were taking on these expenses out-of-pocket.

Plaintiffs, employees of IBM, filed a PAGA action against IBM on behalf of the California Labor & Workforce Development Agency and other similarly aggrieved IBM employees.  The trial court in San Francisco found in favor of IBM, reasoning that Plaintiffs were unable to allege that IBM’s instructions for employees to work from home was the “independent, direct cause” of the out-of-pocket expenses incurred by IBM employees.  Instead, the trial court found that Governor Newsome’s mandate was an “intervening cause,” making IBM not a “direct” cause of employers incurring these expenses.

The Court of Appeal reversed the trial court’s decision, holding that IBM was required to reimburse employee expenditures on items and services necessary to perform work remotely.  The Court identified three requirements of a cause of action alleging violations of § 2802: (1) the employee made expenditures or incurred loss; (2) the expenditures of losses were incurred as a direct consequence of the employee’s job duties at the direction of the employer; and (3) the expenditures or losses were necessary. IBM’s main argument against liability was that Plaintiffs had not proven the second requirement of their claim, as IBM was not the direct cause of the expenses, but instead, that Governor Newsom’s mandate insulated them from liability.

The Court of Appeal examined the language of the statute and found no such justification or requirement that the employer be the direct cause of the expenses incurred by the employee.  Instead, they read the language of the statute to simply require the expenses to be “actually due to the performance of the employee’s duties” for employer’s to be liable.  Further, the Court elucidated that there exists a strong public policy consideration favoring reimbursement of remote work expenses, and infers the legislature’s intent to allocate risk of unexpected expenses to the employer, as the statute does not exempt unexpected expenses from the employer’s reimbursement liability.

As the expenses for which Plaintiff’s seek reimbursement were incurred by employees in performance of their “actual work duties” for IBM, IBM must reimburse employees for these expenses.

There are limits to the court’s holding, however.  The requirement to reimburse employees for expenses arising in performance of their actual work duties does not include items that are “generally usable in all circumstances.”  The Northern District has held that expenses from personal protective equipment, such as face masks or hand sanitizer are not required to be reimbursed by the employer under § 2802, as they are generally usable in all circumstances.  See Williams v. Amazon.com Services LLC (2022) WL 1769124. N.D. Cal. California state courts have attempted to clarify what type of expenses are not generally usable and require reimbursement from the employer, holding years ago that employee use of personal cell phone for work requires reimbursement under § 2802. See Cochran v. Schwan’s Home Serv., Inc. (2014) 228 Cal.App.4th 1137.

In summary, employers have no excuse to avoid reimbursing employees for expenses incurred by working remotely as a result of the COVID-19 pandemic or other external factors, so long as those expenses are incurred by employees in performance of their work duties.

If employees and practitioners would like to learn more about remote work post-COVID-19, we have written more about telework employees and reasonable accommodations here.

If you believe you have been required to pay for business expenses as part of your remote work, please contact Bryan Schwartz Law, P.C..