With more and more employee working virtually, confusion over required reimbursements for remote employees by California employers has resulted in an increase in employee lawsuits that seek reimbursement for expenses incurred while working from home. These lawsuits seek a wide variety of expense reimbursement claims for increased utility costs and for the costs of losing out on the ability to rent out their home offices. These claims are usually brought under Labor Code section 2802. Sometimes employees also bring derivative PAGA actions for wage-statement “inaccuracies.”

Labor Code section 2802 requires employers to reimburse employees for “all necessary expenditures or losses” incurred by the employee in the discharge of their duties or under “obedience to the directions of the employer.” Labor Code section 2802 clarifies that “necessary expenditures or losses” includes all “reasonable costs, including but not limited to attorney’s fees incurred by the employee enforcing the rights granted by this section.”

Employers with remote workers should be aware of their reimbursement requirements under California law and review their policies and telecommuting agreements to ensure employees are being properly reimbursed.

The Federal District Court for the Northern District of California on June 1, 2022, in Williams v. Amazon.com Services LLC, indicated that California employers who adhered to state and/or county mandates to shelter in place and/or work remotely are
not likely to be shielded from liability for employee’s work-related expenses incurred during the mandated time period, even though employers were not the “cause” of the shift to remote work. The Court’s analysis provides guidance on how to determine an employer’s “reasonable” expectations. The Court considered both Amazon’s status as a tech company and Williams’ position as a senior software development engineer (which entailed duties such as writing design documents for software systems and being on-call for production system) to determine that Williams’ duties “plausibly requires the use of physical space, internet, and electricity.” Therefore, “Amazon, a major tech company, surely knew or at the very least had reason to know” that its software engineers incurred “basic costs” related to their work while they worked from home and actual notice of the costs was not required. Therefore, the burden is on the employer to identify and outline work-related expenses arising from remote work.

The general expenses of remote employees commonly include “basic costs” such as reliable access to the Internet, a phone, and a computer. Prior to the pandemic, courts held that employers need only reimburse a “reasonable percentage” of an employee’s use of a
personal phone or Internet costs.

Some newly filed lawsuits by remote employees are now demanding payment for the potential revenue the employees could have collected had they rented out their home office instead of using it for work. In these cases, employees claim that they lost out on potential revenue of renting out the rooms they used as offices, even where there is no actual rental agreement or even a prospective tenant. There is no published authority supporting an award of such expenses in California, and we believe it is unlikely that a court would find that such theoretical expenses are compensable.

Employees have also claimed that they were required to purchase office furniture and equipment to work remotely. These employees, we believe, will likely be successful if the employees can show that the furniture/equipment was necessary as a direct consequence of the employees’ duties. The date of purchase of the furniture/equipment may be relevant. If the employee purchased the furniture before being approved to work from home, the employer may have a strong argument that the furniture/equipment purchase was not a “necessary expenditure or loss incurred by the employee in direct consequence of the discharge of his or her duties.” Labor Code Section 2802.

Prior to the pandemic, some employers, particularly tech-based startups, offered on-site perks such as free meals and dry cleaning. Some of their employees who now work virtually have complained about the cost of preparing or purchasing their own meals while working remotely and are seeking reimbursement for these costs. We believe it may be difficult for employees to successfully recover these costs.

California employers should expect to be responsible for at least the “basic costs” of Internet usage, personal cell phone and laptop usage, and some utilities for workers that the employer requires or encourages to work remotely. Please note, plaintiff employment attorneys are pushing for reimbursement for furniture, the value of potential rent, and other less traditional expenses. It remains to be seen how broadly the California courts will interpret the law.

California employers should explicitly define each employee’s job duties and use these definitions to determine “reasonable” expectations of the costs of remote work. In addition, California employers should always meet with any employees who they are allowing/requiring working from home before the work from home arrangement is commenced. Expectations should be outlined with particularity and expenses should be explored and agreed to. A remote work agreement outlining the expectations (including expenses) may help act as a shield in these types of lawsuits and claims. We recommend that you discuss employee expense reimbursements with your company counsel and use this opportunity to protect yourself against these reimbursement claims by properly tailored agreements with your remote employees.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.