11 Jul EMPLOYERS MUST REIMBURSE EMPLOYEES FOR EXPENSES INCURRED WHILE WORKING FROM HOME DURING THE COVID 19 PANDEMIC
In March 2020, Governor Newsom issued an executive order that required most California residents to work from home during the early phase of the COVID-19 pandemic. In general, California Labor Code section 2802 requires employers to reimburse employees 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 . . .” The application of this statute to expenses incurred by employees working from home as required by the stay-home order was discussed in a recently published decision by the First District Court of Appeal in Thai v. International Business Machines Corporation (7/11/23; Case No. A165390).
IBM was sued in a class action and PAGA case based on its failure to reimburse employees for expenses incurred while working from home during the pandemic under the Governor’s stay-home order, including expenses such as internet and data usage, telephone charges, computer equipment and various accessories. The trial court dismissed the lawsuit agreeing with IBM that it was not required to reimburse employees for such expenses because they were incurred while complying with the stay-home order, and not because of anything IBM required.
On appeal, the Court of Appeal reversed the dismissal of the lawsuit. The Court held that section 2802 is designed to protect workers from bearing the costs of business expenses that were incurred doing their jobs. The Court rejected IBM’s argument that 2802 does not apply to expenses incurred as a result of the stay-home order because those expenses were not directly caused by the employer. The Court explained that section 2802 does not contain a causation requirement. Rather, the statute requires reimbursement of all expenses incurred by employees that are necessary to perform their job duties. Under section 2802, the risk of unexpected expenses is allocated to the employer not its employees.
The Court also distinguished other cases that limited the application of section 2802. For example, employers do not have to reimburse employees for expenses incurred obtaining legally required training or licenses because such costs are not incurred in the discharge of the employees’ duties. (In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498.) Similarly, employers are not required to reimburse employees for pandemic-related costs for face masks or hand sanitizer because those items were generally usable in all circumstances, and local ordinances required residents to wear face masks indoors. By comparison, the costs incurred by IBM’s employees were in the direct performance of their actual work duties for IBM while working from home.
The Court’s decision is consistent with prior cases which held employers must reimburse employees for the business use of their personal vehicle (Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554) and personal cell phones (Cochran v. Schwan’s Home Serv., Inc. (2014) 228 Cal.App.4th 1137). Although the Court’s decision is not surprising, it is still unclear how broad the ruling will be applied. While telephone, internet and computer expenses may be directly related to the employees’ job duties, what about other indirect work-at-home expenses, such as electricity and other utilities? Further, does the Court’s analysis apply to employees who voluntarily opt to work from home for their convenience and could work from the employer’s premises? These questions will likely be answered down the road as more pandemic-related cases are decided.
