Thai v. Int’l Bus. Machines Corp: Court of Appeal Rules Employers Must Reimburse Employees for Work from Home Expenses

In a notable decision from July 11, 2023, the California Court of Appeal held that employees are entitled to reimbursement by their employers for work-from-home expenses such as internet service, phone service and computer equipment incurred due to the COVID-19 pandemic. Thai v. Int’l Bus. Machines Corp. (2023) 93 Cal. App. 5th 364, review denied (Oct. 11, 2023).

Background of the Case

The case originated when Paul Thai, along with other plaintiffs, sought penalties against IBM under California’s Private Attorneys General Act (PAGA) for failing to reimburse employees for necessary expenditures incurred while working from home during the COVID-19 lockdown. This was following California Governor Gavin Newsom’s March 19, 2020, stay-at-home order. The plaintiffs argued that IBM’s refusal to cover expenses such as internet access, telephone service, and necessary computer equipment directly violated Section 2802(a) of the California Labor Code, which mandates employer reimbursement for all necessary expenditures incurred in the course of performing job duties.

The Court’s Decision

The trial court had sustained IBM’s demurrer, which had argued that the Governor’s order was an intervening cause that absolved IBM of liability under Section 2802. However, the appellate court rejected the trial court’s interpretation, stating that this added a tort-like causation inquiry not present in the statutory language. A central point of the court’s analysis was the interpretation of the phrase “in direct consequence of the discharge of his or her duties” as it appears in Section 2802(a). The appellate court emphasized that this language necessitates employers to reimburse employees for all expenses that are a direct result of performing their job functions. The court clarified that the statutory obligation does not hinge on whether the employer’s directives were the proximate cause of those expenses. Instead, it turns on whether the expenses were genuinely due to the performance of the employee’s duties. The court emphasized that the statutory language intends to protect workers from bearing the costs of business expenses and should be liberally construed to promote employee protection.

Significance for California Employees

This decision underscores the broad scope of employer responsibilities under California Labor Code Section 2802(a), particularly in unprecedented situations like the COVID-19 pandemic. It reinforces the principle that employers cannot shift operating costs onto employees, even in situations where external factors, such as government orders, necessitate remote work. For employees in California, this ruling serves as a critical reminder of their rights to be reimbursed for necessary work from home-related expenses, ensuring that the financial burdens of business operations do not fall unfairly on them. Contact a lawyer if you have questions about work from home expenses that your employer is not reimbursing.

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