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Working from Home Expenses Covered—or not-- in California

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Numerous lawsuits filed by employees seek reimbursements for expenses accrued while working from home during the pandemic — but some costs fall into the gray zone.

Santa Clara, CAA number of California employers are facing class actions or actions under the Private Attorneys General Act filed by employees seeking reimbursement for expenses incurred while working from home during the pandemic. Even though the California Labor Code states what can and cannot be claimed, it has been written in a way that leaves room for interpretation by the courts.

Reasonable Costs


According to the California labor code (section 2802) employees can be reimbursed by their employers 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.” It specifies that such expenditures or losses to include all “reasonable costs, including but not limited to attorney’s fees incurred by the employee enforcing the rights granted by this section.” It seemingly opens the floodgates to lawsuits – what are reasonable costs and what expenditures are necessary?

All necessary costs can include the purchase of a desk, computer equipment and chair, as well as reimbursement for utilities, such as electricity, Internet or broadband, and phone service.

In most cases, the court notes that it would be a windfall to an employer to pass its operating expenses on to its employees. However, to successfully claim reimbursement, the labor code states that an employee must show:
  • they incurred necessary expenditures;
  • these expenditures were incurred in the discharge of their duties;
  • the employer knew or reasonably should have known of the expenditures;
  • the employer did not exercise due diligence toward reimbursement.
California employers can expect to be reimburse their employees for at least the “basic costs” of Internet usage, personal cell phone and laptop usage. Some other expenses are debatable.

Here is a hypothetical scenerio:

Computer and cell phone: John, an IT technician, began working at home back in March 2020, when California issued its stay-at-home order due to COVID-19. He used a company-issued laptop and his home internet. Because he needs faster, more expensive broadband than his colleagues, John’s invoice reflected costs higher than some employees.

John used his personal cellphone to make work calls, with an unlimited calling plan and unlimited data. Law360 notes that In Cochran v. Schwan's Home Service Inc., an employee's cellphone use for work required reimbursement, even though the employee had an unlimited plan, which ensured that there was no extra expense to the employee. The 2014 opinion from the California Court of Appeal's Second Appellate District observed that "reimbursement is always required."

In a pending case, Williams v. Amazon.com Services LLC, the judge said that Williams “plausibly alleged that his expenditures, including for internet and electricity, were necessary to do his job, which includes crafting design documents for software systems, performing code reviews for his fellow developers and other tasks related to software development.”

Utilities


Calculating utility reimbursements to the penny or providing a scant monthly stipend can leave employers vulnerable to claims that they shorted workers. Attorneys advise employers to “err on the side of generosity now than to later face allegations of labor code violations.”

According to the Society for Human Resource Management (SHRM), employees must provide enough information for their employers to determine what percentage of a utility is used for work purposes. A worker may ask her employer to cover 24 percent of her Internet bill because she works 40 hours of each week's 168 hours.

John asked that 24 percent of his Internet bill be reimbursed because he works 40 hours of each week's 168 hours. However, his bill also includes television and his family shares the plan so he could be entitled to less.

Office Furniture


SHRM notes that reimbursement for office furniture and supplies is pretty much straightforward. Items such as desks, chairs, computer hardware and other durables that businesses buy for employees' home office areas are company property. They should be marked with asset tags, and employees must agree to surrender them if they are terminated or when they return to the company office. If workers later want to buy these items, they should pay the depreciated value.

According to Labor Code Section 2802, employees have filed lawsuits claiming that they were required to purchase office furniture and equipment to work remotely.” In these lawsuits, the employee is likely to be successful if the employee can show that the furniture/equipment was necessary as a direct consequence of the employee’s duties. The date of purchase of the furniture/equipment may be relevant because if the employee purchased the furniture before being approved to work from home, the employer has 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.”

Reimbursement for expenses is broadly interpreted…

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