By Adam Nathaniel Arce and Julie Ann Giammona
Labor Code section 2802 requires employers to reimburse employees for “all necessary expenditures or losses incurred by the employee as a direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer[.]” In laypersons’ terms, this means that an employer must reimburse employees for costs related to the performance of their job duties. For the first time, a United States District Court has indicated that when an employee works remotely, business expense reimbursement can include utilities (such as electricity and internet), as well as physical space.
On June 1, 2022, the United States District Court for the Northern District of California in Williams v. Amazon.com Services LLC issued its ruling on a motion to dismiss filed by Amazon. An employee sought reimbursement of expenses incurred while working from home during the COVID-19 stay-at-home orders enacted in 2020. Amazon argued that it had no obligation to reimburse the employee for expenses relating to the remote work, because the expenses incurred were the result of government’s stay-at-home orders, not a voluntary decision of Amazon. However, the Court disagreed with Amazon, in large part because Amazon required its employees to work from home while the stay-at-home orders were in effect. The Court held that, because the employee incurred expenses as a direct consequence of discharging work duties (working from home), or by obedience to the directions of the employer (Amazon required the employee to abide by the stay-at-home orders), Amazon could be sued for the expenses incurred by the employee while working from home.
Notably, the Court concluded that such expenses were reimbursable notwithstanding the fact that Amazon claimed to have no direct knowledge of the expenses because the employee had never requested specific reimbursement. The Court held that Amazon knew or should have known that employees who work from home incurred such basic costs related to remote work. These basic costs included costs of physical space, electricity, and internet.
This case of first impression is critical in that it clarifies previously unanswered questions about what specific items need to be reimbursed when an employee works from home at the direction of the employer. Business owners should review their business expense reimbursement policy to ensure employees are being reimbursed for costs such as physical space, internet, electricity, telephones, computers, paper, copier etc. Based on the Courts ruling, employers may be liable under the Labor Code for any costs “plausibly” related to the performance of their work obligations, even if unaware of the exact costs incurred. Failure to comply with the Labor Code in this regard can result in significant financial detriment, including attorney fees and penalties. Ferber Law is available to help craft remote work policies to minimize your exposure. We look forward to assisting you.