The Court of Appeal of the State of California recently held in Thai v. IBM, A165390, that employers are obligated to reimburse expenses incurred by employees working from home if those expenses are a consequence of the employee’s job duties, even if those expenses were caused by state stay-at-home COVID orders rather than by the employer.

Plaintiff Paul Thai (“Thai”) is a former IBM employee whose regular job duties required internet access, telephone service, a computer, and a headset. On March 19, 2020, California Governor Gavin Newsom signed Executive Order N-33-20 (the “Executive Order”), which ordered all individuals living in the State of California to stay home or at their place of residence except as needed to maintain continuity of operations of the federal “critical infrastructure sectors.” Due to the Executive Order, IBM directed its employees, including Thai, to stay home and perform their regular duties from home. Thai paid for the services and equipment necessary to do their jobs from home, and IBM did not provide any reimbursement.

Thai filed a Private Attorneys General Act action in state court in December of 2020, seeking penalties on behalf of all IBM employees who were subject to stay-at-home orders and who were not reimbursed for work-from-home expenses during that period. The lower court sustained a demurrer without leave to amend, finding that IBM was acting in response to government orders and that there was an intervening cause that meant that IBM was not the direct cause of employees’ work-from-home expenses. The court relied upon the language of California Labor Code section 2802, which states: “[a]n 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, or of his or her obedience to the directions of the employer . . .” Section 2802(c) defines “necessary expenditures or losses” as including “all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.”

The appellate court held that the trial court’s decision was based on a tort-like causation inquiry that was not rooted in the statutory language of section 2802.  The court further held that “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 appellate court reversed the decision and remanded the case to the trial court for further proceedings.

Employers who permit remote work should be warned that California courts may interpret Labor Code section 2802 to include remote work costs, even if the decision to work remotely was not made by the employer.

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