With the continued efforts of employers to get employees back to the office in some capacity, the question of what expenses are reimbursable has again become relevant. California Labor Code section 2802 requires employers to reimburse employees “for all necessary expenditures … incurred by the employee in direct consequence of the discharge of his or her duties.” In addition, such expenses must be reasonable. In 2014, in Cochran v. Schwan’s Home Service, Inc., the court established that employers must reimburse employees for the business use of personal cell phones in many circumstances. Then, during the pandemic, it became widely accepted (and litigated-in Williams v. Amazon.com Services LLC) that Labor Code section 2802 requires employers to reimburse employees for “basic costs” related to their remote work (such as internet, electricity, and office equipment) where the employer knew or had reason to know the costs were being incurred. Fast-forward to this past month, in Thai v. International Business Machines Corporation (IBM), where the court arguably expanded an employer’s obligation to reimburse employees. The court rejected an interpretation that the law only requires reimbursement for expenses directly caused by the employer, instead relying on an assessment of “whether the expenses were actually due to performance of the employee’s duties.”
Putting this into the context of a hybrid work environment where an employer permits, but does not require, employees to work remotely, given the court’s reasoning above, it appears an employer would still be obligated to reimburse employees for some portion of remote work expenses. Under the prior “necessary and reasonable” standard, an employer could argue that permitting an employee to work from home was not a “necessary” expenditure. After Thai v. IBM, I’m not so sure. Accordingly, it may be a good time to review your work from home and reimbursement policies with counsel.