Saturday, November 26, 2022

Review Expense Reimbursement Policies for Relevance to Remote Work

When the pandemic started, we sent many of our employees home to work remotely. Should we have a policy regarding reimbursement of their expenses?

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.

Labor Code

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.

Court Decisions

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.”

Lawsuits

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.

Online Tool

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. More information is available at the CalChamber Store.


Column based on questions asked by callers on the Labor Law Helpline, a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Sharon Novak
Sharon Novak
Sharon Novak joined the CalChamber in 2021 as an HR adviser. She previously practiced employment law in firms in Montana and Chicago, served as employment counsel for a national company based in California, and assisted employers as a director of workplace solutions. Her employment law practice included trial work, professional support to human resources departments, and workplace investigations. She also has developed and conducted seminars on critical employment law issues, including sex and age discrimination, sexual harassment, wage and hour practices, and wrongful terminations. She holds a J.D. from Gonzaga University Law School.

Related Articles

Latest Issues Employers Are Asking About on Labor Law Helpline

In Episode 157 of The Workplace podcast, CalChamber employment law expert Matthew Roberts and CalChamber HR Adviser Ellen Savage discuss the issues employers are asking about most often on the CalChamber Labor Law Helpline,...

Considerations for Returning to In-Person Work Setups

In Episode 152 of The Workplace podcast, CalChamber employment law expert Matthew Roberts and CalChamber HR Adviser Ellen Savage discuss hybrid and in-person work environments, and use real workplace examples to share best practices...

The People’s Voice: Voters Prefer Better Rules for Telecommuting

The pandemic has changed how we live and work, certainly in the short term and probably longer. The seventh CalChamber poll, The People’s Voice, 2021, found that voters prefer policy changes to ease their...