Takeaway: Employees in California who, following a March 2020 order from Gov. Gavin Newsom, were forced to work from home due to the COVID-19 pandemic were entitled to reimbursement from their employer of the business expenses they incurred while working from home.
Employees who were told not to come to the office due to the COVID-19 pandemic were entitled to reimbursement from their employer of the expenses they incurred by having to work from home, a California appeals court recently ruled.
Gov. Gavin Newsom’s March 19, 2020, order directing residents to stay at home except as needed to maintain operations in critical sectors did not absolve the company from liability under Section 2802 of the California Labor Code, the court said.
An employee sued the employer under California’s Private Attorneys General Act (PAGA) for alleged violations of Section 2802, which requires an employer to reimburse an employee for all necessary expenditures “incurred by the employee in direct consequence of the discharge of his or her duties.” The plaintiff claimed that the company failed to reimburse employees for the expenses necessarily incurred to perform their work duties from home.
The trial court dismissed the lawsuit before trial, concluding that the governor’s order was an intervening cause of the work-from-home expenses that absolved the company of liability under Section 2802. The plaintiff appealed.
For the plaintiff to accomplish his work duties, he required internet access, telephone service, a telephone headset and a computer with accessories. The company provided those items to its employees in its offices.
After the governor’s order went into effect, the company directed the plaintiff and several thousand of his co-workers to continue performing their regular job duties from home. The plaintiff and his co-workers personally paid for the services and equipment necessary to do their jobs while working from home. The company never reimbursed its employees for these expenses, despite knowing that its employees incurred them.
On appeal, the employees claimed that the trial court’s ruling was contrary to the plain language of Section 2802.
State Law
Section 2802(a) of the California Labor Code provides that an employer “shall 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.” It defines “necessary expenditures or losses” as including all reasonable costs incurred by the employee.
The court noted that Section 2802 is designed to protect workers from bearing the costs of business expenses that are incurred by workers doing their jobs for their employer. The three elements of a Section 2802(a) cause of action are:
- The employee made expenditures or incurred losses.
- The expenditures or losses were incurred in direct consequence of the employee’s discharge of his or her duties.
- The expenditures or losses were necessary.
Only the second element is at issue in the case, the court noted. The employer argued that it was only after March 2020 that the plaintiff began to incur work-from-home expenses, not because his job duties changed—they did not—but because the government required him to stay at home. The government’s order was therefore an intervening cause, the employer argued, foreclosing any claim that the company was the direct cause of the plaintiff’s expenses.
The appeals court noted that the trial court and the employer read the statute as if it requires reimbursement only for expenses directly caused by the employer. But, the appeals court said, that inserts into the analysis a causation inquiry that is not rooted in the statutory language.
Instead, the court said, the plain language of Section 2802(a) flatly requires the employer to reimburse an employee for all expenses that are a direct consequence of the discharge of the employee’s duties. Under the statutory language, the obligation does not turn on whether the employer’s policy was the direct “but-for” cause of the expenses; it turns on whether the expenses were actually due to performance of the employee’s duties.
It may be true, the court said, that the governor’s March 2020 order was the “but-for” cause of certain work-from-home expenses, but nothing in the statutory language can be read to exempt such expenses from the reimbursement obligation. Effectively, Section 2802(a) allocates the risk of unexpected expenses to the employer, which is consistent with the legislature’s intent in adopting the statute, the court concluded.
The appeals court reversed the trial court’s order, ruling that the employees were entitled to reimbursement of the expenses incurred while they were working from home.
Thai v. International Business Machines Corp., Calif. Ct. App., No. A165390 (July 11, 2023).
Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.