Posted May 13th, 2020 in Top Stories, Legal Insights with Tags COVID-19, California Law, COVID-19 for Employers
California Employers: Internet Reimbursement for Home-bound Employees
Home-bound employees must use their home internet to perform work, but is it reimbursable?
In a handful of states, employers must reimburse employees for all expenditures incurred in performing their duties at home. In California, that can include home internet bills. This was true before the pandemic; but now that more employees than ever are working from home, there are still a lot of questions. How much reimbursement is enough when employees are using their home internet for personal reasons? Can the reimbursement be made in a lump sum? How quickly must reimbursements be made? Helpful guidance follows, but here are the highlights:
- Employers should reimburse home-bound employees for at least a reasonable percentage of their home internet expenses; risk-averse employers may choose to reimburse the entire home internet bill.
- If paying a percentage of the bill, employers should explain the calculation method to employees when they receive the reimbursement payment.
- Employers may reimburse home-bound employees for internet expenses in one lump sum.
- Employers should clearly identify the reimbursement amount as such on the employee’s wage statement.
- There is no specific deadline for reimbursement of business expenses; employers can wait to pay until employees return to work, although waiting may entail some legal risk.
How much reimbursement is enough?
California law requires employers to reimburse employees “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” Cal. Lab. Code § 2802(a). While the law is unclear and risk remains, it may be acceptable to reimburse home-bound employees only for a reasonable percentage of their home internet expenses, not the entire bill. Risk-averse employers may choose to reimburse the entire home internet bill.
As a comparison, in the cell phone context, courts have held that reimbursement of expenses is always required regardless of whether the employee has an unlimited cell phone plan, a third-party payment plan, or the employee incurs extra expenses by using their personal cell phone. But case law also suggests that reimbursing a percentage of expenses based on employees’ actual or expected work-related internet use may be sufficient.
Can the reimbursement be made in a lump sum?
Employers may reimburse home-bound employees for internet expenses in one lump sum, as long as the payment fully reimburses the employee for the actual expenses. If the employer decides to pay this lump-sum reimbursement together with the employee’s usual wages, the employer must provide some method to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement. The employer must provide this information to the employee at or near the time of payment.
How quickly must reimbursements be made?
There is no specific deadline for reimbursement of business expenses. Further, business expenses are not considered “wages” under the Labor Code and, therefore, trigger no waiting time penalties*. Nonetheless, creative plaintiffs’ counsel may assert a claim based on employees having to wait for reimbursement, so there may be some risk in deferring reimbursement payments.
* Cal. DLSE, Waiting Time Penalty FAQs (“the reimbursement for business expenses is not wages, [and] the waiting time penalty does not apply to your situation”); DLSE Enforcement Manual § 4.3.4 (revised Dec. 2019) (“‘Any wages’ includes any amount due as wages . . . but does not include expenses.”).