Many organizations, for the first time, are learning how to operate their business with a remote workforce. COVID-19 has upended the operations of organizations by requiring employees to use their own devices, equipment, and utilities typical to perform their job duties. As a result, employees’ personal bills have increased, such as gas and electricity, an employer may be required to reimburse employees for that increase. As of January 1, 2016, California Employers are required to reimburse employees for use of their personal phones for mandatory business purposes. Under the California Labor Code 2082 (“Labor Code”), may apply to other expenses incurred within the scope of the job, such as the internet connection, office equipment, and utilities.
Case law has configured the employer’s obligation in Cochran v. Schwan’s Home Service, Inc., employers must indemnify employees for all “necessary expenditures or losses incurred by the employee in direct consequence or discharge of his or her duties, or of his/her obedience to the directions of the employer.” While the exact measure of reimbursement is still unclear, the Cochran court held that employers must consistently reimburse employees a “reasonable percentage.”
Further, Employers must reimburse the employee even if the employee does not incur any additional expense on his or her cell phone or data plan as the result of using the device for work-related purposes (e.g., the employee has unlimited talk, text, and data plan). Additionally, the Cochran court held that if a third-party is paying the employee’s phone bill, employers are still required to reimburse them for work-related costs. Additionally, the court’s ruling prevents the employer from digging into the private lives of their employees (or their families) to unearth how they handle their finances. To show the employer’s liability under the labor code, an employee only needs to show that s/he was required to use a personal cell phone (or utilities) to make work-related calls, and s/he was not reimbursed.
It is therefore imperative and required that employers show employee cell phone and expense reimbursement on employee wage statements or pay stubs. The best practice is to have a written reimbursement policy implemented in your organization’s handbook. A company policy should outline which expenses are reimbursable and how employees can submit expense reports to the company. Your employment attorney or HR professional should review your reimbursement policy to make sure it is compliant with the Labor Code.
While most Employment Practice Liability Insurance (“EPLI”) policies in California do not cover wage and hour liability claims, some carriers provide a defense sublimit (e.g., legal fees). Because there is no “standard” EPLI policy form, we recommend that you review coverage with your attorney.
Let us know if you have any questions or concerns regarding EPLI coverage or would like us to provide you with a quote for EPLI with a defense sublimit. We are here to help!