Employer Held Statutorily Obligated to Reimburse Employee’s Work-From-Home Expenses

In Thai v. International Business Machines (IBM) Corp. No. A165390 (July 11, 2023), the Court of Appeal of the State of California First Appellate District, held that under Labor Code section 2802(a), the employer is required to reimburse business related expenses which the employee incurs while working from home regardless of whether the employer directed the employee to incur the specific expenses.

While employed by IBM, plaintiff/employee Paul Thai, alleged that he had to provide his own equipment in order to continue working at home, as directed by his employer, after Governor Gavin Newsom issued a Stay at Home Order in March 2020 to combat the spread of COVID-19. Plaintiff claimed that to discharge his work duties, he required equipment such as internet access, telephone service, a telephone headset, a computer, and accessories. IBM never paid Mr. Thai and his co-workers for these expenses. Thai joined a Private Attorneys General Act action against IBM alleging it failed to reimburse employees for necessary business expenses as required by Labor Code section 2802(a).

After successive demurrers wherein IBM argued that it was not the “direct cause” of the business expenses, the trial court sustained the employer’s demurrer to plaintiff’s third amended complaint, without leave to amend, and found that because IBM was acting in response to a government order, an intervening cause precluded liability to IBM.

Plaintiff appealed and contended that the trial court’s ruling was “contrary to the plain language of section 2802(a).” Labor Code section 2802 provides in relevant part that “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer…” Subdivision (c) of section 2802 defines “‘necessary expenditures or losses’” as including “all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.” IBM argued that the government order was the intervening cause. The court rejected the argument reasoning that the plain language of section 2802(a) requires the employer to reimburse an employee for all expenses that are a “direct consequence of the discharge of [the employee’s] duties.” The Court also noted that “Section 2802 is designed to protect workers from bearing costs of business expenses that are incurred by workers during their jobs in service of an employer.” Under the statutory language, what matters is whether the expenses were actually incurred in performance of the employee’s duties. IBM also argued that the work-from-home expenses were neither inherent to its business nor for its benefit, given the public health purpose behind the Governor’s March 2020 order. The court held following the March 2020 order, the work-from-home expenses were inherent to IBM’s business and that there was no question that the work performed was for the benefit of IBM.

The trial court’s decision to dismiss the complaint was reversed, and the matter was remanded for further proceedings. The holding in Thai is a reminder to employers that Labor Code section 2802(a) requires an employer to reimburse its employees for all expenses incurred which are directly related to the employee’s duties and incurred for the employer’s “benefit.” Employers should review their expense reimbursement policies to ensure compliance with the Labor Code and clarity to their employees.

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July 27, 2023