Are You Responsible for Your Employee’s Phone Bill?

Covid-19 changed the way many employers do business, particularly as it comes to the widespread acceptance of remote work as an option. Many employees view remote work as a privilege, something that provides an expanded degree of flexibility. However, with unprecedented numbers of employees working from home, employers are facing new challenges with respect to the costs of remote work. Many employers feel that they are saving employees money by letting them work at home, because they save the cost (and wasted time) of the commute, but it may not be that simple.

Under the Fair Labor Standards Act, the cost of uniforms, tools, and other items that are considered primarily for an employer’s benefit or convenience cannot be deducted from an employee’s wages if doing so would drop them below the minimum wage and overtime pay obligations. Many states have ancillary statutes which may provide additional protections for workers. One such state is California.

In 2021, David G. Williams brought a class action lawsuit against his employer, Amazon. The lawsuit claimed that Amazon had failed in its duties as an employer to reimburse expenses incurred by its remote workers, such as Wi-Fi, phone use, electricity, and basic office supplies. Williams claims these expenses cost him between $50-100 per month. Further, although Williams never submitted a reimbursement request for these expenses, he and other remote workers like him allege that they are entitled to be reimbursed because they were “forced” to incur an expense on the company’s behalf. Under California law, employers must indemnify employees for all necessary expenses or losses incurred in the discharge of an employee’s duties.¹

If the case has been taken on contingency, Williams has virtually nothing to lose in filing a lawsuit, as all “necessary expenditures” incurred in enforcing rights under the statute, including reasonable costs like attorneys’ fees, are recoverable. It has yet to be seen whether Amazon will be responsible for these remote working costs, but so far the case has survived Amazon’s Motion to Dismiss. If the law is interpreted to require reimbursement for remote worker expenses like cable, electricity, or phone, it’s highly probable that a court could require reimbursement for a whole host of other expenses—such as gas for the trip to work, in some circumstances.

For those employers breathing a sigh of relief that they are not located in California, this is still bad news. For one thing, California’s labor laws are written such that even a single remote worker residing in California could expose a business to California law with respect to that employee—thus, wage and hour restrictions along with numerous other requirements may apply. Also, California is not the only state with highly employee-favorable laws around reimbursement of business expenses.²

For instance, New Hampshire’s law is more broadly drafted, requiring reimbursement, upon being provided proof of payment, for expenses incurred “in connection with employment.”³ In Minnesota, the law is less clear, but does require reimbursement for “purchased or rented equipment,” and “required consumable supplies.”⁴

Meanwhile, in Illinois, North Dakota, and South Dakota, the laws are drafted almost identically to the California law. However, North Dakota expressly limits the reimbursement requirement when the expense is for tools of the trade or “any other equipment that is also used by the employee outside the scope of employment.”⁵ Thus, an employee’s use of their own internet, phone, or electricity would not be reimbursable in North Dakota, but may be in South Dakota or Illinois.

On the other end of the spectrum, there are states like Virginia where the VA Department of Labor and Industry (DOLI) expressly does not accept claims for unreimbursed business expenses.⁶

Somewhere in the murky middle are states like Colorado.

In Colorado, “wages” include:

All amounts for labor or service performed by employees, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculating the same or whether the labor or service is performed under contract, subcontract, partnership, subpartnership, station plan, or other agreement for the performance of labor or service if the labor or service to be paid for is performed personally by the person demanding payment. No amount is considered to be wages or compensation until such amount is earned, vested, and determinable, at which time such amount shall be payable to the employee pursuant to this article.⁷

This could potentially be interpreted very broadly. Is an increased cable bill as a result of remote work considered an “earned, vested, and determinable” expense? As of the drafting of this tip, there is no case that has read it that way. Nonetheless, California is paving the way and a new precedent on business expenses may lead other states to add more (or less) protections for their workers.

What can employers do to reduce the risk that a similar lawsuit could spawn?

First, having a clear policy on what expenses are reimbursable may help protect your business. With the quick onset of Covid-19, many employers did not have clear procedures in place for the transition from in-person to online, especially with respect to reimbursable expenses. An employee that knows in advance what items or services they can expect to be reimbursed for is less likely to launch major litigation.

Second, provide a simple procedure for requesting a reimbursement. This could be as simple as providing a form where employees may record daily, weekly, or monthly expenses. It could be a policy requiring a receipt for each expense. In either case, the simpler the policy, the easier it will be to defend in case an employee brings a lawsuit (“all you needed to do was submit your receipt, it would have been approved”). Both one and two listed here are good policies regardless of the employee’s status as an in-person, remote, or hybrid worker.

Finally, an alternative to a reimbursement policy for remote workers could be a specific stipend policy. Some employers, especially those living in states with laws similar to California’s, have opted for a policy which provides more flexibility. Instead of requiring itemization, employers draft a policy that gives a flat rate reimbursement for remote worker costs. Usually this is between $50-100 per month. Employees sign the policy acknowledging that this lump-sum payment is a reimbursement for fluctuating remote expenses. Thus, if internet, phone, and electricity cost less one month or more in another month, the lump sum evens out. This is an option many employers choose to opt for.

Whatever the decision, employers should be wary of state laws on reimbursable expenses to ensure they are maintaining compliance.

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¹Cal. Lab. Code § 2802.

²Amazon isn’t even the only company facing a lawsuit. Large and well-known companies like Fox Broadcasting Co. and Wells Fargo are facing similar lawsuits. The firm representing Williams also claims it has reached settlements with numerous other companies.

³N.H. RSA §§ 275:48(V)(b) and 275:57; N.H. Code Admin. R. Lab. 803.02(e).

⁴Minn. Stat. Ann § 177.24 subd. 4; Minn. R. 5200.0090.

⁵N.D.C.C. § 34-02-01.

⁶Virginia DOLI instructions for completing “claim for wages.” Pg. 1.

⁷Colo. Stat.  § 8-4-101 (emphasis added)

Featured Image by Rebecca Sidebotham.