An Update on Remote Work Reimbursements
Topics: COVID-19, Wage & Hour Issues
California employers have recently experienced a material uptick in lawsuits from employees seeking reimbursement for expenses incurred while working from home. These lawsuits seek a wide variety of expense reimbursement for increased utility costs and for the costs of losing out on the ability to rent out their home offices. Employees typically bring these claims 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.” Importantly, 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.”
Many California businesses continue to have employees work from home or are now using a hybrid structure. These employers should be aware of their reimbursement requirements under California law and review their policies and telecommuting agreements to ensure employees are being properly reimbursed. CDF covered remote work expenses and employer reimbursement requirements in 2020, which readers can view here.
What Defenses are Available to Employers Sued For Work-From-Home Related Expenses?
This question was very recently considered by the Federal District Court for the Northern District of California on June 1, 2022. In Williams v. Amazon.com Services LLC, the Court denied Amazon’s Motion to Dismiss after Amazon raised two (unsuccessful) arguments:
- Amazon’s adherence to government-issued stay-at-home orders absolves them of liability, and
- Williams did not submit reimbursement requests to Amazon so they could not know that Williams incurred work-related expenses that required reimbursement. The Court found that despite these arguments, the plaintiff had sufficiently pled his claim under Section 2802 and denied the Motion to Dismiss.
The Court also held that Amazon’s expectation for Williams to work from home after the stay-at-home orders were imposed was sufficient to establish Amazon’s liability. Thus, 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. That argument did not work in the Northern District and is not likely to work elsewhere.
The Court’s analysis of Amazon’s second argument 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
How to Determine Basic Costs
Across a number of cases, employees’ most common “basic costs” include reliable access to the Internet, a phone, and a computer. Importantly, prior to the pandemic, courts have held that employers need only reimburse a “reasonable percentage” of an employee’s use of a personal phone or Internet costs.
Beyond that, the “physical space” requirement as referenced in Williams v. Amazon is more difficult to define. Some of the newly filed lawsuits are now demanding payment for the potential revenue 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.
In other cases, employees have claimed 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.” 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 disgruntled employees have since complained about the cost of preparing or purchasing their own meals while working remotely and are now seeking reimbursement for these costs as well. By their nature, perks are not necessary for employees to discharge their duties, so we believe it may be difficult for employees to successfully recover these costs, but in California, one never knows what the courts will do.
Based on current trends, California employers can expect to be on the hook 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. However, plaintiff attorneys are now testing the bar by seeking 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 in this area.
To protect against liability (and attorneys’ fees), 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 to work 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) would be ideal and may help act as a shield in these types of lawsuits and claims.
CDF will continue to monitor the trend of reimbursement lawsuits and provide readers with any updates.