COVID-19: Working from home and employer reimbursement of remote-work expenses in California and beyond

To reduce the spread of COVID-19, many employers are requiring their employees to work remotely (either voluntarily or because several states, including California and New York, have imposed social distancing restrictions). The new work-from-home reality has implications for employers with workers employed in California and other states as described in this article. See Norton Rose Fulbright's additional COVID-19 resources.

Employers required to reimburse employees for necessary expenses in growing number of states

Section 2802 of the California Labor Code requires employers to reimburse their employees for the reasonable and "necessary" expenses they incur in direct consequence of discharging their job duties. The purpose of this statute is "to prevent employers from passing their operating expenses on to their employees." Gattuso v. Harte- Shoppers, Inc., 42 Cal. 4th 554, 562 (2007) (internal citation omitted).

Section 2802 liberally applies to many expenses that employees may be required to incur to perform their jobs, including vehicle expenses, travel expenses, and cell phone and internet plans. For instance, where it is mandatory for employees to use their personal cell phones for work, generally they must be compensated for a reasonable percentage of their phone plans. For many companies, this requirement has already impacted how companies implement 'Bring-Your-Own-Device' (BYOD) and remote work programs. The potential obligation to reimburse employees for remote work expenses is not limited to California, however. Other states, including Illinois, Iowa, Montana, New Hampshire and South Dakota, have enacted laws which may require reimbursement of employee expenses, although case law in these states is not as well-developed as in California.

Mandatory remote work expenses must be reimbursed in California

Remote work expenses traditionally have not been reimbursable under California law because telecommuting and remote work opportunities are not mandated by the employer, as many companies have optional work-from-home programs that are at the employees' convenience, and such employees continue to have the option to work in their employer's office and use company equipment and supplies if they desire.

For example, in Novak, Defendant Boeing offered its employees the option of voluntarily participating in a virtual worker program. One participant sued Boeing under California's reimbursement law, alleging that his home office expenses were not reimbursed. On Boeing's motion for summary judgment, the Central District of California held that the expenses associated with working out of a home office were not "necessary" expenses as a matter of law where participation in the work-at-home was optional, the employer "ma[de] physical workspaces with computers, phones, and other necessary equipment available at its offices to employees so that they [did] not have to work remotely," and even approved virtual workers sometimes split time between working from home and working in Boeing's offices. Novak v. Boeing Co., 2011 WL 9160940, at *3 (C.D. Cal. July 20, 2011). The Novak court explained that the additional internet and phone expenses incurred by Boeing's virtual workers was because the virtual workers "choose to work from home and potentially incur additional phone and internet expenses that would have been paid for by Boeing if the employees were working at Boeing's offices." Id. Similarly in Lawson, the court dismissed plaintiff's claim for reimbursement of his home internet where the evidence showed he had been provided with a company-owned mobile hot spot. The court rejected plaintiff's contention that the superior speed and convenience of his home internet plan created an obligation to reimburse under Section 2802. Lawson v. PPG Architectural Finishes, Inc., 2019 WL 3308827, at *7 (C.D. Cal. June 21, 2019).

On the other hand, in Aguilar, a cleaning supplies sales company expected sales employees who worked from home to call customers and place internet sales orders. The court found an employer was required to reimburse its employees for personal cell phone and internet expenses because they "were a foreseeable and clearly anticipated cost of doing business." Aguilar v. Zep Inc., 2014 WL 4245988, at *17 (N.D. Cal. Aug. 27, 2014). The Cochran case provides guidance on how to calculate a reasonable reimbursement for the mandatory use of personal devices such as cell phones: employers must compensate their employees for a "reasonable percentage" of the employee's cell phone bill under Section 2802. Cochran v. Schwan's Home Serv., Inc., 228 Cal. App. 4th 1137 (2014).

For the duration of the pandemic, many employees will be forced to work from home. Employers therefore could be required to reimburse employees who are forced to work from home during the COVID-19 epidemic for their reasonable and necessary home office expenses, which may include a portion of the expenses associated with:

• Cell phone or landline plan.
• Home internet plan.
• Personal computer or tablet.
• Fax machines.
• Teleconferencing software or hardware.

However, this may not include other home office expenses which are merely at the convenience of the employee, such as higher-speed internet, computer monitors, ergonomic chairs, or printers.

Reimbursement required even where employees incur no additional expense

Where the expense is necessary, reimbursement could be required regardless of whether the employee would have otherwise incurred such expenses, as the Ninth Circuit indicated in a timely opinion this March. See Herrera v. Zumiez, Inc., _ F.3d _, 2020 WL 1301057, at *11 (9^th Cir. Mar. 19, 2020). This means an employer could be required to reasonably compensate employees for, say, a portion of their personal cell phone bill, even if the employee was already planning to pay for these services for their personal use.

Employers should review remote work initiatives for employment, information governance, and cybersecurity concerns

Employers in California and similar jurisdictions should determine which of their employees are required to work remotely, what expenses employees may incur as a result of working from home, and determine if and how much of their remote work expenses must be reimbursed. If an employer pays a fixed amount in the form of a stipend, the employer's policy should allow employees to submit expenses for reimbursement if the employees believe the stipend was insufficient to cover their work-related expenses. The employer may then consider whether to offer additional reimbursement or to decline the employee's claim. Such considerations may have long-lasting effects beyond the pandemic as companies increasingly implement BYOD programs and encourage remote work arrangements which may trigger reimbursement.

Remote work also presents other issues which are exacerbated under the current crisis. Companies may be ill-prepared with the legal implications of switching to an all-remote model. This includes developing BYOD policies that address employee use of personal phones, tablets, computers, and other devices that access company data. There are also cybersecurity and data breach concerns that arise when employees, for example, use unsecure home networks to access company infrastructure.

Norton Rose Fulbright is well-equipped to assist with any questions you may have about the overlapping legal issues that remote work arrangements present, from compliance with labor and employment laws, to mobile device management (for employees using personal phones and devices to conduct work), and cybersecurity considerations.