Posted: November 6, 2020 | News
Failing to reimburse California employees properly for work-related expenses they incur can lead to lawsuits. California Labor Code section 2802 requires employers to reimburse employees “for all necessary expenditures or losses incurred by the employee” while the employee performs his or her work. The intent of this statute is to prevent employers from passing along their operating expenses to employees. With more employees working from home, we are sure to see an increase in lawsuits alleging violations of Labor Code section 2802.
While most employers know that they must reimburse employees for mileage when employees use their personal vehicles for business and that cell phone reimbursements must be paid when employees use their personal cell phones for work, remote work can lead to claims for reimbursement of additional costs like the employee’s home internet and electricity usage.
When an employee does not receive appropriate reimbursement, the employee may sue to recover the unreimbursed business expense, plus interest and attorneys’ fees. Therefore, employers are well-advised to ensure that they are reimbursing employees for all costs associated with their work and to communicate that fact to employees. Following are some best practices to protect against an employee reimbursement lawsuit:
- Assess for each employee what type of personal expenditures the employee may be making while conducting work for the employer.
- Where an employee’s out-of-pocket expenditure includes personal and business-use, for example in connection with an employee’s personal cell phone or home internet service, determine what percentage is used for business purposes versus personal use and issue payment based on that percentage. Although an employee may have an unlimited cell phone plan or may pay a flat fee for home internet usage, courts have held that an employer cannot receive a “windfall” and must pay for its portion of the business use.
- Distribute a Business Expense Policy containing language that clarifies that if an employee believes that he or she is not receiving an appropriate reimbursement amount in any case, the employee must notify the employer immediately and provide documentation supporting the employee’s claim.
- Clarify further in the Business Expense Policy that the reimbursements paid to employees are intended to cover all expenses incurred when working remotely. This would include (but would not be limited to) internet usage, electricity, home office equipment, office supplies, etc. Ensure that the amount you are paying as a reimbursement is sufficient keeping these items in mind.
- To further protect against a potential class action lawsuit on this issue, consider implementing arbitration agreements containing class action waivers.
Colleen M. McCarthy, Esq. is a Partner and chairs the Firm’s Employment Practices Group. She has dedicated her practice to representing and protecting employers, with a particular emphasis on risk mitigation through preventative counseling and sound practical advice. For over 20 years, Colleen McCarthy has counseled employers about the complicated employment laws that impact their businesses to ensure that they are in compliance, and to reduce the chance of costly litigation. Colleen McCarthy may be reached by phone at (949) 608-6900 or email firstname.lastname@example.org.