As the COVID-19 pandemic hit, many employers were forced to have employees work remotely. While this has shown to have lasting benefits for employer and employee alike, few organizations had the bandwidth to effectively create remote work policies. One question that is often asked is about phone and data usage costs. The answer depends on where your workforce is located.
Generally, under the federal Fair Labor Standards Act (FLSA), employers are not required to reimburse employees for work-related expenses incurred working remotely. However, an important caveat to that rule is that an employer may not require employees to pay or reimburse their employer for work-related expenses if it would cause the employee’s pay rate to fall below the required minimum wage ($7.25) for hourly employees or salary threshold ($35,568 per year) for exempt employees. In California this threshold is $14/hour for non-exempt employees and $58,240/year for exempt employees (for employers with 25 employees or less) and $15/hour for non-exempt employees and $62,400/year for exempt employees (for employers with 26 employees or more).
It is imperative for employers with employees earning wages close to the minimum wage, and particularly the salary thresholds, to closely monitor the expenses employees incur working remotely so that reimbursements may be made, if necessary. Since so few states have enacted laws requiring reimbursement for remote work expenses, the general rule under the FLSA will apply in most cases.
The requirements of the Americans With Disabilities Act (ADA) may also alter employer reimbursement obligations. In some instances, telework may be provided to qualified individuals with disabilities as a reasonable accommodation under the ADA. In those cases, the Department of Labor (DOL) has instructed that “employers may not require employees to pay or reimburse their employers for remote work costs such as internet access, a computer, additional phone line, and increased use of electricity if telework is being offered as a reasonable accommodation.”
California Specific Requirements
At least ten states – Illinois, California, Massachusetts, Montana, Pennsylvania, New York, New Hampshire, North Dakota, South Dakota, Iowa − and the District of Columbia have enacted laws requiring employers to reimburse employees for certain remote work expenses.
California and Illinois have the most robust and expansive business expense reimbursement laws. As an example, under Section 2802 of California’s Labor Code, employers are required to reimburse their employees for “all necessary expenditures or losses incurred by the employee as a direct consequence of the discharge of his or her duties,” or to comply with the directives of the employer.
The determination as to which expenses are “necessary” is certainly a fact-specific inquiry and will vary depending on the type of job the employee holds. California courts have given us some guidance on which expenses would fall into the category of “necessary expenses.” Interestingly, this law has been interpreted to require employers to reimburse employees for a reasonable percentage of their monthly internet or mobile telephone bill for work-related uses, even in instances where the employee has an unlimited wireless data plan or where their internet bill does not increase based on usage. Notably, employers are only required to reimburse “necessary” expenses in California. Businesses that do not require or encourage employees to work remotely are not required to reimburse these expenses, as employees have the option to work in the office, absent the FLSA and ADA restrictions noted above.
What is a Necessary or Required Expense?
Whether an expense will be deemed necessary for the performance of an employees’ job depends primarily on the type of work the employee performs. Generally, reasonable reimbursable expenses will likely include:
- Employee internet usage;
- Employee mobile data usage;
- Laptop computers and tablets; and
- Equipment such as copiers, printers, and fax machines, if necessary.
The employee who prefers the convenience of a standing desk, a wireless computer mouse, or an ergonomic chair will likely foot the bill for these expenses, as such items are generally not deemed reasonable or necessary, absent an employer’s legal requirement to provide them.
Practical Considerations for Employers
As the pandemic continues, many employers are attempting to adapt to their workforce’s new normal, which may include a continuation of their current remote model or the implementation of a hybrid work model. Employers that operate in several different jurisdictions are encouraged to familiarize themselves with the expense reimbursement requirements of all those jurisdictions.
Employers should also be aware of any potential reimbursement obligations under the FLSA or the obligations for employees working remotely as a reasonable accommodation under the ADA.
Finally, employers operating in more than one jurisdiction should coordinate with a Labor & Employment attorney or Human Resources professional to review their existing expense reimbursement policy or to create and implement such a policy. The policy should clarify the period in which employees may submit reimbursement requests, identify an appropriate individual to whom employees submit reimbursement requests, and outline which expenses are eligible.
If you have questions about this article or need assistance in creating a remote work policy, please contact us at 866-476-2123. We will be happy to assist you.