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Lawsuits Put Spotlight on Paying Remote Workers' Expenses

In some states, employers must reimburse remote workers for business-related costs

June 17, 2022 | Stephen Miller, CEBS

A man sitting in a chair and talking on the phone.

Some prominent U.S. companies are being sued by remote workers alleging that their employers had a legal obligation under state law to reimburse them for work-related expenses.

The issue of paying for remote workers' expenses, whether because of legal obligations or as a way to attract and keep talent in a tight labor market, isn't going away as the pandemic recedes, even as some big-name employers, such as Tesla, demand that employees return to the worksite. According to new research by Society for Human Resource Management (SHRM) Research, 48 percent of about 1,700 surveyed workers in the U.S. said they will "definitely" seek a remote position for their next job.

"Close to a quarter of respondents currently working in an onsite position say that they definitely want a remote role in the future," said Mark Smith, Ph.D., SHRM's director of HR thought leadership.

Lawsuits Seek Remote-Cost Reimbursement

On the legal front, a class-action lawsuit brought by California workers against Amazon claims that the online retail giant violated state laws by failing to come up with a policy to compensate employees for remote-work-related expenses, such as monthly Internet costs, phone and personal computer use, and office supplies, Bloomberg reported.

Wells Fargo & Co. is also being sued over work-from-home expenses.

"These suits raise questions over employers' obligation to pay for things like cellphone and Internet connections, supplies, and even a portion of the employees' utility bills," wrote Jonathan M. Crotty, a partner with Parker Poe in Charlotte, N.C.

There are no federal laws requiring remote-work reimbursement unless these expenses drop employees' pay below the minimum wage. "However, a number of states require employers to reimburse employees for necessary business expenses," Crotty noted. "Exactly what constitute necessary expenses remains unclear, especially when the items involve things like Internet connections that employees also use for non-business reasons."

If employers decide to adopt reimbursement policies, Crotty advised, these policies should:

Clearly define and provide reimbursement for legitimate expenses associated with telecommuting.

Include proportional reimbursement for expenses that have dual business and personal uses.

"Documentation of such expenses and reimbursements could help avoid later disputes with employees who claim that they incurred unexpected costs associated with their work-from-home arrangements," Crotty said.

Danielle Lackey, chief legal officer at Boston-based Motus, which provides reimbursement apps for businesses, noted that a California judge denied Amazon's request to dismiss the lawsuit.

"The court rejected Amazon's reasoning that where employees are working from home because of government mandates, the reimbursement obligation need not apply," Lackey said. "This is a reminder to employers that there is real risk and meaningful exposure for companies that fail to reimburse their workers in compliance with the applicable laws, as the penalties associated with failure to properly reimburse employees can add up very quickly."

Reimbursing Expenses

There is evidence that reimbursing work-from-home expenses is good for employers as well as employees. A 2022 survey of more than 1,000 U.S. workers by payroll and HR services firm Paychex found that the benefits most desired by employees include those for remote-work expenses, including home office stipends (cited by 31 percent of respondents) and Internet reimbursement (30 percent).

Some employers are responding to this desire in an effort to attract and keep in-demand talent. Business advisory firm Deloitte, for example, announced earlier this year that it was rolling out $500 work-from-home subsidies as part of an expanded compensation and benefits package.

"We initiated a work-from-home technology subsidy of $500 and a temporary expansion of reimbursable commuting expenses to enhance hybrid work, further enable the transition to new ways of working, and to help our professionals feel safe connecting with each other in person," the company said.

SHRM Benefits Survey Looks at Remote Work Reimbursement

SHRM Research's 2022 Employee Benefits Survey found that 62 percent of organizations said they offer employees a subsidy or reimbursement for at-home office or work equipment. Among those organizations:

Employers, on average, provided about $891 to employees to cover costs related to working from home.

Most employers (95 percent) cover costs related to work technology, such as computer monitors, keyboards or headsets.

Over two-thirds (68 percent) cover costs related to general office supplies like pens or notepads.

Nearly one-fourth (24 percent) said they cover the cost of chairs for employees working from home.

The survey was conducted from Jan. 11 to Feb. 28, 2022, with responses from 3,129 HR professionals at organizations across all sizes, industries and sectors.

Employer Considerations

"Whether or not employees should be reimbursed for their personal assets can depend on where the employee lives," Lackey said. States such as California, Illinois, Montana and others require employers to reimburse employees for necessary expenses that benefit the employer, including mixed-use assets like mobile devices. In these jurisdictions, "employees with unlimited personal phone plans who use their phone for work must be reimbursed a reasonable percentage of those costs—even though the outlay by the employee hasn't changed."

Beyond the legal obligation, Lackey noted, employers often elect to reimburse their employees for work-related expenses "because it is the fair thing to do."

When doing so, she explained, "there are a lot of variables that go into making fair and accurate reimbursements. Geography is a key factor. People living in San Francisco know that their costs are higher than co-workers' [costs] in Boise, so employers should regionalize their reimbursement strategies."

Mobile device use results in both fixed costs, such as carrier fees, and variable costs, such as data usage, Lackey pointed out. "The same thing applies to expenses associated with any asset that employees might use to support their employer's business: vehicles, Internet, home office, etc. To ensure fair and accurate reimbursement for every employee, employers need to take all of these factors into account."

Reimbursement Advice from SHRM22

Some states, such as California under Labor Code section 2802, mandate employee reimbursement for remote workers' business expenses, said Brenda S. Kasper, SHRM-SCP, speaking June 15 at the SHRM Annual Conference & Expo 2022 in New Orleans.

Nationwide, the Fair Labor Standards Act (FLSA) provides that mandated employee expenses cannot reduce employee wages below minimum wage or cut into overtime wages, said Kasper, founding member of the law firm Kasper & Frank LLP in San Diego, in her concurrent session "Managing Employees in the Virtual/Hybrid and In-Person Worlds: Avoiding Wage and Hour Pitfalls."

Reimbursement may not be necessary if the expense "is only for the convenience of the employee, even in California," Kasper said.

[SHRM HR Q&As: What are the business-related expense-reimbursement requirements under California law?]

In addition to statutory requirements, "check whether a contractual entitlement to expense reimbursement exists under the employer's expense reimbursement policy," as employers can be held to their policies if employees sue, Kasper advised.

Internet service and use of a cell phone may be "necessary" but a printer and paper may not be, depending on the job. A camera-equipped device may be required for Zoom calls but a ring light probably isn't.

Some employers may require keeping files secure, so file cabinets with locks could be a necessary expense for some jobs.

What about reimbursements for business and personal "mixed use" items? Employer requirements could vary depending on how state statutes are written, Kasper said.

Rather than reimbursing employee expenses, many employers choose to deliver necessary work materials to remote workers. "They send them the equipment," Kasper noted.

Others choose to provide a fixed monthly stipend based on good faith and a reasonable estimate of the employee's reimbursable expenses.

Otherwise, reimbursement should be provided based on receipts or other documentation, Kasper said. Review and update expense reimbursement policies, keep track of expenses being paid and establish guardrails so reimbursements don't get out of hand and strain budgets.

Fully remote employers who live beyond a normal commuting distance may be entitled to travel reimbursement if employers request that they visit the office.

As for mileage reimbursement for those who use their personal vehicles to conduct business, "follow the IRS standard mileage rates," which have recently been raised for the second half of 2022, Kasper advised.

Related SHRM Articles:

Select a Pay Strategy for Remote Workers, SHRM Online, September 2021

Remote Workers Expect Pay to Reflect Their Locations, SHRM Online, April 2021

[Visit SHRM's resource page on Remote Work.]