Reimbursement of Expenses for Remote Workers
In an effort to prevent the spread of COVID-19, many employers are permitting, or even requiring, that employees work from home. A consequence to this is that some states mandate employers to reimburse their employees for certain expenses incurred as a result of their remote employment – and California is one of those states!
Employers are required to reimburse employees for reasonable expenses they incur for equipment and services necessary to work from home. This can include cell phone, internet and computer usage expenses. Under federal law, employers are generally obliged to reimburse expenses incurred by their employees if those expenses reduce their pay scale below minimum wage standards.
California Labor Code requires employers to cover “all necessary expenditures or losses” that workers incur while doing their jobs. Those costs can include the purchase of office equipment and reimbursement for utilities, i.e. electricity, internet or broadband and phone service.
California businesses must have compliant labor policies for expense reimbursements and workplace safety. Now, this needs to include policies that specifically address expenses incurred by a remote workforce. However, some of these policies may be designed to stay in effect only until staff return to the physical worksite.
- Monthly payments of $25, $40, $50, or $75 for utilities are accepted amounts, but employers may want to do some market research to justify the reimbursement amount provided. Employees who feel the amount is too low should have an avenue to appeal.
- Monthly reimbursements can vary by category of worker. For example, remote IT teams might need faster, more expensive broadband than their co-workers so their expense allotment may be higher.
- Employers can require employees to provide additional information (such as utility bills) to determine what percentage of a utility is used for work purposes. Calculating utility reimbursements to the penny or providing a small monthly stipend may leave employers vulnerable to claims of failure to compensate their employees fairly. It is better to stay on the side of generosity as to avoid allegations of labor code violations.
- Internet reimbursements can be handled as nontaxable expense reimbursements provided the employer is able to justify how they arrived at the amount. However, some monthly payments—such as a car allowance that a traveling salesperson might apply to a vehicle regardless of actual cost—are likely still taxable as wages.
- Reimbursement for office furniture and supplies should be approved. Items such as desks, chairs, computer hardware and other durables that businesses buy for employees’ home office areas will remain as company property. They should be marked with asset tags, and employees must agree to surrender them if they are terminated or when they return to the physical office. If workers later want to buy these items, they should pay the depreciated value.
- Rent/mortgage is not reimbursable. Employers do not need to cover a percentage of teleworking employees’ rent or mortgage because living expenses are incurred even without the pandemic.
‘Healthful and Safe’ Workspace Required
California law requires employers to provide a “healthful and safe” work environment even when employees are working from home. A telework agreement should include language requiring remote workers to maintain a safe working environment and ask them to specify an area—whether it’s a room, or space within a room, such as a dining room table—as their designated workspace. The law stipulates that employers can ask to inspect workers’ home workspaces to ensure those areas are safe and free of hazard.
Remember – Business expenses in California are reimbursed through accounts payable, not payroll. These expenses should not be comingled with wages. Employers should always provide reimbursement through a separate check or deposit payment.
We’re here to help! Call SPS (707) 445-9641 if you have any questions concerning the implementation of these new labor law requirements.