Employers requiring employees to work from home during COVID-19 quarantines should promptly review and update their expense reimbursement policies.
In response to the COVID-19 pandemic and state and local quarantines, many employers directed employees to work from home. For employers and employees alike, remote working requires numerous adjustments, including establishing new communication routines, and new systems for tracking time and productivity. Another such adjustment arises in connection with the tools and equipment needed to work in a new space.
For example, employers are forced to tackle the challenge of connectivity for home workers, as nearly all home workers use telephones and the internet. The connectivity issue for many businesses may seem, at first glance, easy to resolve as many employees have internet capability and of course cell phones. While reliance on an employee’s personal equipment and wiring may solve the connectivity problem, such reliance triggers new and possibly unforeseen reimbursement obligations.
Reimbursement of Employee Expenses
California’s Labor Code Section 2802 normally requires employers to reimburse employees for “reasonable” and “necessary” expenses incurred while performing their job duties. The law is intended to prevent employers from passing on their operating expenses to their employees. Prior to the pandemic and resulting quarantines, employers who permitted, but did not require, employees to work from home generally were not obligated to reimburse employees for the use of their home computer, internet and/or cell phone. The Courts and enforcement agencies generally assumed such expenses were incurred for personal convenience, rather than for an employer’s benefit.
In light of COVID-19, those assumptions no longer apply. Most remote workers who now are working from home are there in response to their employer’s request and instruction. As such, to the extent these employees are using their cell phones, internet and other electronics for work, they are doing so to perform their jobs. Therefore, the reasonable expenses associated with the use and maintenance of such equipment must be reimbursed.
Amount of Reimbursements
When considering the reimbursement obligation, employers must address not only the amount of reimbursement, but the timing of reimbursements. Turning to the first issue, the Courts provided employers various options. They can instruct employees to provide receipts and bills showing itemized home expenses and have the employee identify the portion of such expenses dedicated to work. Alternatively, they can pay the employee a stipend based upon a reasonable estimate of such expenses. Where a stipend is adopted, the employer must provide the employee the opportunity to request additional payments in the event the stipend does not cover the full amount spent.
The California Supreme Court in the case of Gattuso v Harte-Hanks Shoppers, Inc. identified yet a third alternative, whereby an employer may pay for work-related expenses by increasing an employee’s salary or commission. This third alternative is tricky though because the employer must be able to identify the specific accounting used to determine the appropriate reimbursement amount.
Timing of Reimbursements
As to when such reimbursement must be made, there is some flexibility. Employees should be reimbursed at a reasonable rate, such that they are not forced to finance the employer’s own expenses. In some cases, this will require a monthly stipend. In the event of a large expense, such as the purchase of a printer or the repair of an internet connection, the expense should be reimbursed upon demand. An employer should prepare a reimbursement form to facilitate the reimbursement request process. Where an employee fails to utilize the form and fails to request reimbursement, the employer need not guess at a reimbursement amount. The employee has the obligation of complying with reasonable protocols adopted to ensure adequate and timely reimbursement.
Most employers are well aware that employees who are terminated must be paid all accrued wages and vacation within 24 hours (72 hours for employees who resign). Those rules do not necessarily apply to expense reimbursement. Employers should attempt to complete reimbursement at the time of termination, but are not required to do so. Instead, they can rely on the standard timeframes implemented for the handling of employee expense reimbursement requests.
In many cases, an employee’s home connectivity expenses are incurred regardless of business activities. This is particularly true where the employee has contracts with flat fee rates, rather than rates based upon usage. Arguably, in those cases, work at home on an employer’s behalf does not create a genuine expense. The Courts, however, rejected this argument and consistently held that employers must pay a fair share of such costs.
Take Steps to Control Expenses
Employers can, of course, take steps to control home office expenses. They can instruct employees not to use their cell phones for work and to rely strictly on email for communication. They can provide their employees with work-issued cell phones. They can provide hotspots for employees so that they can access the internet without reliance on home internet plans. Employers can and should also instruct employees to avoid incurring any work expense absent authorization.
In light of the calamity of business closures or quasi-closures, many employers are hoping for relief from some of these new and unanticipated business expenses. After all, most employers did not choose to send employees home; they simply complied with governmental mandates. While some financial relief may arrive in the form of loans (forgivable or not) and tax assistance, employers should not expect any relief whatsoever with respect to employee protections, including minimum wages and expense reimbursement. Those mandates remain securely in place. Consequently, in addition to other pandemic-triggered adjustments, employers should review and update their remote work and expense reimbursement policies immediately.