In an effort to slow the spread of the 2019 novel coronavirus (“COVID-19”), many employers around the country are encouraging—if not requiring—their employees to work remotely. Although telecommuting during a public health crisis presents obvious benefits, it also presents employers with unique challenges, such as ensuring compliance with applicable expense reimbursement laws.
Employees working from home may incur any number of expenses – home computers, printers, Internet service, WiFi connections, smartphones and even paper, pens and other office equipment.
Under federal law, employers are generally not required to reimburse employees for their business related expenses. However, employers cannot require employees to bear costs associated with necessary “tools of the trade”—i.e., equipment “used in or … specifically required for the performance of the employer’s particular work”—if the costs cut into the minimum or overtime wages required under the law.
This prohibition applies with equal force during a public health crisis. Indeed, as part of a recent series of “questions and answers” published in response to the COVID-19 crisis (https://www.dol.gov/agencies/whd/flsa/pandemic), the United States Department of Labor (“DOL”) highlighted the prohibition against unlawful “kickbacks” in the telecommuting context. More specifically, in addressing whether “businesses and other employers [are] required to cover any additional costs that employees may incur if they work from home (internet access, computer, additional phone line, increased use of electricity, etc.),” the DOL reiterated that “[e]mployers may not require employees who are covered by the FLSA to pay or reimburse the employer for such items that are business expenses of the employer if doing so reduces the employee’s earnings below the required minimum wage or overtime compensation.”
Employers implementing telecommuting programs in response to COVID-19 should therefore take care to ensure that the programs do not result in wage and hour violations under federal law when applied to specific employees. For example, if employees must acquire new laptop computers or upgrade their Internet service in order to work from home, employers must ensure that the costs associated with those additional expenses do not cut into the required minimum wage or overtime compensation due.
Employers must also be mindful of state-specific expense reimbursement laws, which may impose additional requirements. In California, for example, employers are obligated to reimburse employees for all “necessary expenditures or losses” the employees incur in carrying out their job duties. The obligation to provide reimbursement applies regardless of whether an employee’s expenses cut into the minimum wage. Reimbursement may also be necessary under California law even when an employee does not incur additional out of pocket costs.
In 2014, a California Court of Appeal held that employers are obligated to reimburse employees for a reasonable percentage of their cellphone costs, even when the employees do not incur any extra expenses in connection with their work-related cell phone use. This requirement could have significant ramifications in the telecommuting context, where employees may utilize their own resources (e.g., Internet service, WiFi connections, cellphone, etc.) without incurring any additional out of pocket costs.
Given the complexities in this area of the law, employers implementing telecommuting programs should consult with counsel to help ensure compliance with applicable expense reimbursement requirements in their jurisdictions.