You may know that Labor Code section 2802 requires employers to reimburse employees for expenses they incur under your direction or request that are reasonably necessary to performing their job. Have you pivoted your reimbursement practices in light of the changed way people worked during the pandemic? For example, if you have any employees who are working remotely, you might be missing major categories of reimbursable expenses, like employees’ personal cell phone, equipment, office supplies, and items purchased for their home offices. As employees continue teleworking, employers should rethink what can qualify as a work-related expense and should familiarize themselves with California’s requirements for reimbursements.
While some employees now work from home, others are still working with the public, but under increased health and sanitation requirements. Still others are scrambling to pick up slack in a severe worker shortage. No matter where your employees fall on this spectrum, you may want to rethink your reimbursement practices for the following:
- Home office expenses – In the past, employers allowed employees to work remotely as a perk, and therefore, the employee was expected to cover tangential costs for choosing this perk. But what if they are required to work at home and using their cell phone to conduct business? Cochran v. Schwan’s Home Service, Inc., instructs that an employer must reimburse an employee for using their personal cell phone for work purposes, even if it cost the employee no more out of pocket under their current phone plan. Unfortunately, the court did not give much guidance on the extent of the reimbursement, stating only that it be “a reasonable percentage” of the bill. This same “reasonable percentage” reasoning applies to things like internet usage. In addition, many employees might have incurred out of pocket expenses for things like paper, pens, and other supplies. When you consider that many employees today are not working from home by choice and find themselves adding to their home office in order to work, you may expect to see an increase in reimbursement requests and should consider a policy regarding requests for reimbursement and approval of expenses of this type.
- Uniforms – You may find you have an increase in uniform costs due to higher standards for sanitation and restrictions on sharing items like aprons. Keep in mind that you must pay for all uniform costs, including upkeep and maintenance above and beyond simply washing them, and must reimburse such costs paid by employees.
- Personal protective equipment (PPE) – If federal, state or local government health codes require your worker to use certain PPE, you must cover the cost under state and federal wage and hour law. In addition, you must cover any PPE you require your employees to use, regardless of health codes.
Other considerations for avoiding mistakes
Many employers also find the process requirements for reimbursement confusing. A few procedural pitfalls to avoid include:
- Making payments – Process reimbursements through accounts payable, rather than payroll. Do not comingle them with wages.
- Timing of claims – Under the law, an employee has three years under which to submit a reimbursement claim. You may try to set a policy for a shorter time frame, but it may be worthwhile to accept the claim even if it is late.
- Lack of notice – California courts are divided on the issue of employer liability when the employee did not notify them in advance of the expense. Therefore, you may want to err on the side of assuming notice was not required for you to pay. Alternatively or in addition, you might consider a reminder communication to employees to submit any requests for reimbursable expenses as a result of changed conditions during the pandemic.
- No waivers – The law will not acknowledge any agreement you ask your employees to sign waiving their right to reimbursement for expenses.
The best way to avoid trouble is to create clearly defined policies and procedures for submitting and reimbursing expenses and communicating those policies clearly and frequently. In addition, the more you control the expenses, such as purchasing the PPE or the laptops everyone will use at home, the more you can plan for and control such expenses, and you can avoid the reimbursement process altogether. If, despite your best intentions, you think you may have made a reimbursement mistake, you can always audit your expenses and reimburse your employees.
Now more than ever California workplace laws are swiftly changing and the demands placed on large and small business employers seem to increase. Duggan McHugh’s experienced team of attorneys is here to help employers navigate these complicated expense reimbursement issues.