Reimbursing Telecommuting Expenses
In the age of the Covid-19 Pandemic, it is Important California Employers know the Telecommuting Expenses they Need to Reimburse for their Employees who work Remotely.
Reimbursement for business-related expenses is a creature of the state. There is no federal requirement to reimburse employees for business-related expenses. Rather, the only federal limitation is that employers cannot require employees to bear costs associated with necessary “tools of the trade”—i.e., equipment “used in or … specifically required for the performance of the employer’s particular work”—if the costs cut into the minimum or overtime wages required under the law.
The California Labor Code roars, however, where federal law is relatively silent. Specifically, Section 2802(a) requires an employer to “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….” And failing to do so opens up employers to liability. The exposure runs a wide spectrum: wage claims before the labor commissioner to class or collective actions seeking it, interest, penalties, and attorney fees.
Even where the expense is necessary, reimbursement could be required regardless of whether the employee would have otherwise incurred such expenses, as the Ninth Circuit indicated in a timely opinion this March. See Herrera v. Zumiez, Inc., (9th Cir. Mar. 19, 2020). This means an employer could be required to reasonably compensate employees for, say, a portion of their Internet bill, even if the employee was already planning to pay for these services for their personal use.
For the duration of the pandemic, many employees will be forced to work from home. Employers therefore could be required to reimburse employees who are forced to work from home during the COVID-19 epidemic for their reasonable and necessary home office expenses. Below, please find a listing of different work-related expenses your employees have-are-and-will incur during the ongoing pandemic.
Cell Phone Use
In California, when employees must use their personal cell phones for work-related calls, employers must pay some reasonable percentage of those wireless phone bills even if employees incurred no extra expenses using their cell phone for work. See Cochran v. Schwan’s Home Serv., Inc. It follows that if employers allow their employees to opt to use their personal cell phone, instead of a company-issued cell phone, that they should be reimbursed a reasonable percentage of their phone bill for work-related calls or other data usage for using texts or the internet for work purposes.
Of course, the courts have not defined what “reasonable percentage” means, but the main options are:
Reimburse for the actual voice and/or data fees incurred for business purposes, which requires employees to submit expense reports itemizing the costs of calls made for work purposes and the costs of data used for work supported with cell phone bills or other evidence of the costs;
Reimburse for a percentage of voice and/or data fees that accurately reflects the amount of mandatory business usage, and if a percentage or flat monthly amount is used, then allow employees to seek reimbursement for any additional costs incurred over the percentage or flat amount if the actual costs of business use exceed those amounts; or
Provide employees with a cell phone or another communication alternative for business use.
Internet and Electrical Use
If the employee’s electric bill increased because they are now working remotely, is that reimbursable? Technically and conservatively, yes. And if an employee must now use their home internet for work (having no employer-paid alternative), a conservative approach would be to recognize the employer’s responsibility to reimburse for a reasonable percentage of the bill.
Such may require the employer comparing prior months’ bills to the current month to establish an amount “attributable” to the remote work. Or, setting a flat, universal amount to reimburse and then permit the employee to demonstrate that the actual expense exceeded the flat reimbursement amount.
Printing and Shipping
This would be more straight froward. In most cases, the employee incurring the expense would submit the invoice/receipt for the costs of the printing, copying, or shipping completed at the behest of the employer.
Employees working remotely will need devices to work from – a laptop, desktop, tablet, etc. And depending upon your job description, it may include other types of devices and equipment, like a printer, fax machine, copy machine, etc.
If the employer is not furnishing the equipment from their inventory themselves and is expecting the employee to supply the device to telecommute, then the employer should expect and be prepared to pay reimbursement for use of the device.
Most organizations, realistically, do not pay for work-related use of a car. And that is problematic as it is a reimburseable work-related expense. Outside of the employee's daily commute into work, any other travel must be paid for by the employer.
Those employer who do comply typically pay either a set monthly car allowance or a mileage reimbursement rate (typically the standard mileage rate set by the IRS). But another strategy has gained traction with employers across the country: the ﬁxed and variable rate reimbursement, often referred to as FAVR (pronounced "favor," or /ˈfāvər/).
A FAVR car allowance reimburses employee vehicle costs by identifying both the ﬁxed, localized costs (insurance, depreciation, registration) and variable costs (gas, oil, maintenance) when setting the employee’s reimbursement.
Neither a standard car allowance nor a mileage reimbursement distinguishes between expense types or sets rates based on local costs. These fatal ﬂaws lead to inaccuracies, inequitable reimbursements, and costly consequences.
A FAVR program also bases reimbursement rates on the expenses associated with a standard vehicle most appropriate to the employee’s job. This promotes accurate and equitable payments.
Each employee receives a ﬁxed regular payment (like a car allowance) plus a variable cents-per-mile rate that rises and falls with variable expenses, with all rates based on employee zip code and a standard vehicle.
Employers in California and similar jurisdictions should determine which of their employees are required to work remotely, what expenses employees may incur as a result of working from home, and determine if and how much of their remote work expenses must be reimbursed. If an employer pays a fixed amount in the form of a stipend, the employer's policy should allow employees to submit expenses for reimbursement if the employees believe the stipend was insufficient to cover their work-related expenses.