IBM employee Paul Thai needed the following items to accomplish his duties: internet access, telephone service, a telephone headset, and a computer and accessories. IBM furnished Thai with these items in its offices. On March 19, 2020, Governor Newsom ordered all California residents to stay home or at their place of residence except as needed to maintain continuity of operations of certain critical sectors.
After the Governor’s order went into effect, IBM directed Mr. Thai and several thousand of his coworkers to continue performing their regular job duties from home. Mr. Thai and his coworkers personally paid for these work expenses while working from home. IBM never reimbursed its employees for these expenses.
Thai thereafter sued IBM for its failure to reimburse its employees for these expenses. Thai alleged that Labor Code Section 2802(a) required the reimbursement.
Section 2802(a) provides in relevant part, “An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer . . .” Section 2802(c) defines “necessary expenditures or losses” as including “all reasonable costs”.
Courts have found that purpose of this section is to protect employees from bearing the costs of businesses expenses they incur in doing their jobs.
IBM’s chief argument was the Governor had forced its employees to work remotely. IBM argued that the employee’s expenditures were not in direct consequence of the discharge of their duties and were not at the direction of the employer. Rather, they incurred those expenses because of the Governor’s stay at home order.
The California Court of Appeal disagreed, noting that IBM was improperly inserting a causation requirement into Section 2802. The Court held that the reimbursement obligation “…does not turn on whether the employer’s order was the proximate cause of the expenses; it turns on whether the expenses were due to performance of the employee’s duties. It may be true that the Governor’s March 2020 order was the ‘but-for’ cause of certain work-from-home expenses, but nothing in the statutory language can be read to exempt such expenses from the reimbursement obligation.” The Court of Appeal ruled in favor of Thai.
Thai v. International Business Machines Corporation, 93 Cal.App. 5th 364 (2023).
Note: This case provides important clarification on an issue that employers have been grappling with since the beginning of the COVID-19 pandemic. Labor Code 2802 is being interpreted to encompass all expenses employees incur in the performance of their job duties – including equipment and services needed to perform their duties at home.