Do Your Remote-Work Policies Comply with California Wage Rules?

California's stringent wage and hour laws have led to unique legal risks for employers as they manage remote workers during the COVID-19 pandemic—which makes it essential for employers to understand the common pitfalls to avoid.

"Many things throughout the world, and especially in employment law, have been forever transformed by the pandemic," said Danielle Moore, an attorney with Fisher Phillips in San Diego, to a virtual audience at the California State Council of SHRM's (CalSHRM's) 2021 California State HR Advocacy and Legislative Conference on April 15.

She noted that many California employers have been seeking advice on how to prevent lawsuits in light of the novel wage and hour issues that the coronavirus pandemic has caused.

"It's so important for HR practitioners in California to understand that both the labor code and case law interpretations of statutes greatly influence our abilities to create and maintain compliant employment policies and practices," said Mike Letizia, SHRM-SCP, president and CEO of Letizia HR Solutions Inc. of Stockton, Calif.

Here are some of the key compliance challenges employers should monitor as the pandemic persists.

Tracking Hours for Remote Workers

The Fisher Phillips COVID-19 Employment Litigation Tracker has documented COVID-19-related workplace lawsuits and found that issues related to remote work are among the most common.

Moore said employers are having a harder time monitoring for wage and hour compliance since many nonexempt employees aren't at the physical worksite. Remote work arrangements have led to claims regarding time-keeping violations, off-the-clock work, and missed meal and rest breaks.

Employers should note that California's wage orders define "hours worked" as "the time during which an employee is subject to the control of an employer" whether or not the employee is required to work.

Are employees spending time for the benefit of the employer? If so, the time is likely compensable even if employees decide on their own to do the work, Moore explained.

Under federal law, businesses can require employees to work small amounts of time each day without compensation if the time is administratively difficult to track. But the California Supreme Court has said the federal "de minimis" rule doesn't apply to California wage and hour laws.

"It's not just about the actual time that needs to be paid but also the time-keeping," Moore explained. Employers must as accurately as possible track start and end times, lunch breaks, meetings, and pre- and post-shift work.

Providing Meal and Rest Breaks

Employers must provide adequate meal and rest breaks to employees even if they are telecommuting. Such breaks can be difficult to track when employees aren't physically present at the worksite.

California's nonexempt workers are entitled to a 10-minute paid rest break for every four hours worked "or major fraction thereof." Employees must also receive a 30-minute unpaid meal break for every five hours they work. They can waive their right to take a meal break only if they work no more than six hours. A second break must be provided after 10 hours but can be waived if the first break was taken. 

Meal breaks must be taken before the end of the fifth hour of a shift. So if workers clock in at 8 a.m., for example, they must clock out for lunch by 12:59 p.m.

Employers have a harder time ensuring remote workers take breaks, Moore said, particularly since employers can't see when workers are on a break and may interrupt them.

Michael Kalt, an attorney with Wilson Turner Kosmo in San Diego and CalSHRM's director of government affairs, noted in a prior session that CalSHRM supports several bills that would create more flexibility for remote workers. For example, AB 1028 would allow remote employees to choose when during the workday to take a meal or rest break.

Business Expense Reimbursement

When employees work from home, they may incur business expenses for Internet and phone use, as well as office supplies and furniture.

Even when employees are working onsite, they may incur COVID-19-related expenses for personal protective equipment and other safety measures.

Employers should note that the California Labor Code requires them to reimburse workers for reasonable business expenses. Specifically, California law requires an employer to "reasonably reimburse" an employee for "all necessary expenditures or losses incurred by the employee" in carrying out job duties or employer directives.

The key words are "reasonably" and "necessary," Moore noted. "That doesn't mean that you have to pay thousands of dollars a month to the employee for their Internet service, but you do have to reasonably reimburse if it's necessary."

Working remotely was largely voluntary prior to the pandemic, but shelter-in-place orders made remote work necessary.

[SHRM members-only HR Q&A: What are the business-related expense reimbursement requirements under California law?]

Even if employees have unlimited-use plans for their personal mobile phones, California courts have found that employers have to reimburse employees when they use their personal devises for work if the employer doesn't otherwise provide a device and cellular plan.

Most employers pay for mobile phone use through a stipend, Moore said. "But you can also do it with receipts and reimbursement."

In one case, a court found that the employer did not have to reimburse an employee for his home Internet access because the company provided workers with access to a mobile hotspot. The court rejected the employee's argument that he had to use his home Internet service because it was faster.

When determining whether to reimburse employee expenses, Moore said, employers should consider the following:

• Is the expense necessary?
• How much is reasonable to spend?
• How should this expense be reimbursed?

She noted that employers that provide a stipend should have a clear policy letting employees know that they need to tell someone in human resources if the stipend doesn't cover the actual cost.

Moore said employers should carefully review their business expense reimbursement policies for remote workers because she expects reimbursement issues to spark the most wage and hour claims related to the COVID-19 crisis.