Mcle Self-study: When Remote-work Expenses Must Be Reimbursed Under Labor Code Section 2802

• Jurisdiction: California,United States
• Author: By Sebastian Miller
• Publication year: 2015
• Citation: Vol. 29 No. 2

MCLE Self-Study: When Remote-Work Expenses Must Be Reimbursed Under Labor Code Section 2802

By Sebastian Miller

Sebastian Miller is a solo practitioner in Santa Clara. He worked in biglaw for seven years before founding his current firm and now focuses on litigating employment claims on behalf of employees. He can be reached at (408) 348-1728 and his email address is: sebastian@sebastianmillerlaw.com.

Remote work is a fact of life for many exempt employees. Employers expect them to be available by phone and email on short notice, and often ask that they use computers to perform work late at night and on weekends. Employees must have cell phones with data plans, home internet access, and a laptop or similar device in order to meet these demands. This article addresses when and to what extent California Labor Code section 2802 requires that employers reimburse employees for these sorts of remote-work expenses.

Elements of a Claim for Remote-Work Reimbursement

Labor Code section 2802 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." An employer generally satisfies this obligation by either reimbursing a given expense or providing the employee with the equipment necessary to ensure he or she does not incur the expense in the first place.¹ In Gattuso v. Harte-Hanks Shoppers, Inc., the California Supreme Court confirmed that the purpose of the statute is to "prevent employers from passing their operating expenses on to their employees."²

But when has an employer passed an operating expense onto an employee? When the following elements are met: "(1) the employee made expenditures or incurred losses; (2) the expenditures or losses were incurred in direct consequence of the employee's discharge of his or her duties, or obedience to the directions of the employer; and (3) the expenditures or losses were necessary."³

Expenses Incurred in "Direct Consequence" of an Employee Discharging Job Duties

For most remote work, an employee will have little difficulty satisfying the first and second elements above. For example, the employee may show that he or she regularly received calls and responded to emails outside of normal business hours using his or her smartphone. He or she might also prove that he or she regularly complied with weekend requests to quickly edit and resend documents using his or her home internet connection. In these instances, the phone bill and/or archived email will provide clear documentary evidence that the employee incurred expenses "within the course and scope of employment."⁴

The recent court of appeal decision in Cochran v. Schwan's Home Services ensures that employers cannot avoid liability by claiming that the employee incurred no marginal cost in performing the remote work.⁵ The decision in Cochran arose from the appeal of a trial court's order denying class certification to a 1,500-member class that sought reimbursement for using personal cell phones to perform job duties. The trial court concluded that the class could not show commonality, based, primarily, on its belief that the following individual issues would have to be resolved before the class members could establish that the employer was liable under section 2802:

• whether the employee was motivated to purchase a different cell phone or minute plan because he or she anticipated working remotely;
• whether the employee directly paid the cell phone expenses or if they were paid by another person under a "family plan" or similar arrangement; and
• whether a common cellphone plan or payment method existed among the class.⁶

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In other words, the trial court interpreted Labor Code section 2802 to require that the employee show he or she incurred some marginal cost as a result of the employer's remote work requirement (i.e. he or she purchased more minutes or a more expensive plan for his or her cell phone) before the employer would be held liable under the statute. The court of appeal rejected this sort of "but for" causation test, ruling that an expense is "in direct consequence" of the employee's duties and reimbursable under the statute even if it was initially incurred for reasons wholly unrelated to the employer's directions.⁷

The court of appeal reasoned that limiting expense reimbursement to marginal costs would allow an employer to get something for nothing (in this case, an employee who is able to take calls remotely). So adopting the trial court's view would permit precisely what the statute is designed to prevent—the employee bearing operating expenses that the employer would otherwise incur to ensure the employee's ability to work remotely.

Hence, an employee's fixed-cost, remote-work expenses must be reimbursed even if, irrespective of his or her employer's demands, the employee would have incurred the expense anyway (for example, by purchasing a personal cell phone, paying for data and minute plans, or having internet access at home). Furthermore, questions concerning the amount of reimbursement owed concern damages, not liability. Those questions therefore do not preclude class certification.⁸

Recent Cases Concerning Whether Remote Work Was a "Necessary Expenditure"

Assuming an employee's remote work both benefits his or her employer and is actually related to the employee's job, the reasoning in Cochran leaves employers with very few grounds to argue that a given expense was not "in consequence of the employee's duties." Accordingly, employers defending remote-work section 2802 claims may seek to argue that the expenses should not be reimbursed because they were incurred for employee convenience rather than for the benefit of the employer.

To this end, some employers may point out that their offices were accessible to a given...