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3 Tips For Handling Remote Worker Reimbursement Claims

By Mike LaSusa · December 21, 2020, 1:31 PM EST

Remote work is here to stay, and that means employers need to know whether and when they are required to reimburse employees for expenses related to telecommuting.

Recent surveys show management and workers both see upsides to work-from-home arrangements, which have become increasingly common during the coronavirus pandemic. Stanford University economist Nicholas Bloom estimated in June that more than four in 10 U.S. workers now telecommute full time.

However, attorneys say there's little consistency — and often little clarity — on the rules surrounding employers' reimbursement responsibilities when it comes to remote employees. Here, Law360 takes a look at how businesses and workers can navigate this relatively new legal landscape.

Know Your State's Laws

Working from home can entail costs for workers, including internet access, telephone connectivity, office equipment, and increased use of electricity and other utilities.

However, the U.S. Department of Labor has said there's no explicit federal requirement for employers to pay for such costs, unless the employees are covered by the Fair Labor Standards Act and the costs would reduce the worker's effective pay rate below the federal minimum wage, or if working from home is an accommodation under the Americans with Disabilities Act.

On the other hand, California and Illinois both mandate that businesses pay employees back for certain "necessary" and "reasonable" expenditures.

In California, attorneys told Law360, that requirement has been interpreted liberally by the courts, including in a 2014 case in which a state appeals court found that employees required to make work calls on personal cellphones are entitled to reimbursement even if they are already on a family member's plan or subscribed to a flat-rate plan.

That precedent has applications for work-from-home scenarios, said Procopio Cory Hargreaves & Savitch LLP attorney Clint Engleson.

"It's definitely starting to come up," Engleson said. "We're seeing claims for reimbursement for utilities, internet usage, cellphones, office equipment."

The application of the California reimbursement law hinges in part on whether workers are required to work remotely or simply given the option to do so, Greenberg Traurig LLP partner Jamie Rich told Law360.

For those required to work at home, employers may have to pay a "reasonable percentage" of certain expenses like internet access, even if working remotely doesn't add to the employee's bills, Rich said.

But, she added, "some recent cases have clarified that when the employer provides a company-owned device, such as a phone or hot spot, reimbursement is generally not required even if the employee's device is more convenient."

Although Illinois' reimbursement law is modeled after California's law, the two aren't identical, said Neal Gerber & Eisenberg LLP attorney David Weldon.

"Most notably, California law does not require that an expenditure 'inure to the primary benefit of the employer' for it to be reimbursable," Weldon told Law360. "That difference between the two laws could impact, for example, the obligation of Illinois employers to reimburse employees for expenses such as cellphone data plans and home internet service."

Weldon expressed frustration that the Illinois Department of Labor, or IDOL, has not yet issued guidance about how the reimbursement law, which was enacted last year, should be applied in remote work scenarios. The department confirmed to Law360 that it hasn't issued such guidance.

"While it may only be a matter of time before this issue gets litigated, for now, Illinois employers must make critical reimbursement decisions without the benefit of any clarification from the IDOL or Illinois courts," Weldon said.

Accept Uncertainty

The rules surrounding remote work reimbursements in other states vary significantly, in some cases resulting in even less clarity regarding employers' reimbursement responsibilities.

For example, there's nothing under New York law that requires employers to reimburse remote employees for expenses like phone and internet bills, said Chaim Book, co-founder and partner at Moskowitz & Book LLP.

However, Book said, if an employer does agree to pay certain costs, that might be considered a "wage supplement," which could trigger statutory payment time frames and other legal requirements.

"If they agree to do it and don't do it, then the employee has recourse not only to seek the reimbursement of the expense — whether through filing a complaint with the [state] Department of Labor, or even hiring a lawyer and filing a lawsuit — but they would be entitled to double damages," he said.

Book said he hadn't seen any guidance on reimbursements in the remote work context from New York courts or from the state Department of Labor, and the department did not respond to a request for comment. But in neighboring New Jersey, Book said, there's even less certainty.

"I guess anything goes in New Jersey," he joked.

Pennsylvania's Department of Labor and Industry has stated explicitly that employers are not required to pay employees for additional costs associated with working from home, but McGuireWoods LLP attorney Adam Simons predicted that "intrepid plaintiff lawyers will find ways to challenge this." Still, Simons doesn't foresee reimbursement becoming a big issue for larger employers.

"I think it'll be a larger issue for employers who have not had work-from-home or telework arrangements," he said.

Weigh Costs and Benefits

Despite the divergence in different states' laws, the attorneys who spoke with Law360 shared similar recommendations for employers.

In a state like California, which requires reimbursement, Procopio Cory's Engleson advises businesses to implement remote work agreements that detail what kinds of costs are reimbursable, and how to document them.

"It's important to have a remote work environment that spells out which expenses are necessary and which aren't," he said.

Both Engleson and Greenberg Traurig's Rich suggested providing a stipend to cover necessary and reasonable business expenses associated with working from home. That could help reduce paperwork by limiting reimbursement requests to expenses not covered by the stipend.

"In that event, [employers] may also want to require employees to notify management as soon as possible if they believe the stipend is insufficient, i.e., it does not cover the business expenses they are actually incurring, at which point the employer can then consider individual requests on a case-by-case basis," Rich said.

In states with no reimbursement requirement, employers should nevertheless consider establishing a stipend or other system to help employees with additional costs associated with remote work, Book said.

"Understand that there are certain stresses that are caused by working from home," he said, pointing to common struggles like balancing work and child care. "If an employee is putting in the effort to make sure that it works, and there are expenses involved, then I think it's only fair and right."

Simons echoed those comments, but cautioned that there's no "one-size-fits-all" approach for employers.

"They should have some criteria or some review mechanism by which, if they are not doing the stipend, that they're reviewing the requests and ensuring consistency in how they're determining what is reasonable and necessary," he said.

--Editing by Abbie Sarfo.

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