In this second year of the COVID-19 pandemic, many employees feel remote work is here to stay. However, many employers still have lingering questions on what expenses are and are not reimbursable.
In California, Labor Code Section 2802 mandates employers reimbursement of “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties…” Common reimbursable expenses include: business use of a personal cell phone or computer, travel expenses, uniforms (where dry cleaning and pressing are required by the employer), and tools and equipment necessary to perform their jobs.
With the increase in employees working remotely, employers discovered that many more types of expenses should be reimbursed when employees are working from their homes. Some examples include: office equipment, like chairs, desks, printers and ink/paper, internet, and even utility/electricity bills. If employers cannot determine the actual cost of an employee’s business use of their personal cell phone usage, then the employer is required to reimburse the employee for a reasonable percentage of their personal cell phone bill – even when the employees have an unlimited data plan. Though it may be difficult to determine exactly which expenses are “reasonable and necessary,” some employers find it easier to deliver required work equipment directly to their remote staff. Other employers provide a fixed monthly stipend based on a reasonable estimate of the employees’ expenses – key word is “reasonable.”
Interestingly, the Federal Labor Standards Act (FLSA) states that employee expenses cannot decrease employee wages below the mandated minimum wage or cut into overtime expenses. That is, the FLSA does not require employers to reimburse employees for remote work expenses except in cases where the employee would essentially be receiving less than minimum wage.
Since California allows employees to seek reimbursement for necessary expenses within 3 years of incurring the expense, the best practice for California-based employers is to establish legally compliant written reimbursement policies and ensure employees are routinely compensated for reasonable expenses. Please feel free to contact your MMC HR Services team to assist with drafting a compliant policy for your workplace.