Do Your Work-from-Home Policies Comply with California Law?

When Gov. Gavin Newsom ordered Californians in mid-March to shelter in place to slow the spread of the coronavirus, businesses quickly transitioned to remote work.

Six months later, most nonessential workplaces remain shuttered, and some companies say their workers will telecommute through the summer of 2021—and perhaps for far longer.

California businesses and HR departments that neglected to craft appropriate policies and procedures for expense reimbursements and workplace safety should prioritize that task. They can either create policies that reflect a predominately remote workforce or establish a "pandemic protocol" that remains in effect only until workers return to traditional office spaces.

"Many employers were not prepared for COVID, so there was a sense of urgency with keeping the business running," said Mike Letizia, SHRM-SCP, president and CEO of Letizia Solutions Inc. of Stockton. "In a pandemic, you make quick choices based on what you know at the time. Crisis and triage are understandable, but if this is going to be with us for an extended period of time, you need to revisit it. Don't wait for it to be over to change policies."

Reimbursements

The 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 a desk, computer equipment and chair, as well as reimbursement for utilities, such as electricity, Internet or broadband, and phone service.

Monthly payments of $25, $40, $50 or $75 for utilities "are all defensible," said William Hays Weissman, an attorney with Littler in Walnut Creek, but employers should do some research so they can justify the reimbursement amount they provide. 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 support-staff colleagues, Weissman said.

Employees must provide enough information for their employers to determine what percentage of a utility is used for work purposes, Letizia said. That can be a complex task: A worker may ask her employer to cover 24 percent of her Internet bill because she works 40 hours of each week's 168 hours. However, if the bill also covers her television and smart devices, or if she shares the plan with family or friends, she could be entitled to less.

"Controllers and accounting people will definitely have a little extra work," Letizia said.

Calculating utility reimbursements to the penny or providing a scant monthly stipend can leave employers vulnerable to claims that they shorted workers, noted Michael Newman, an attorney with Hinshaw & Culbertson in Los Angeles. Better to err on the side of generosity now, he said, than to later face allegations of labor code violations.

'A Slippery Slope'

Employers generally do not need to cover a percentage of teleworking employees' rent or mortgage. "It becomes a slippery slope, inconsistent with tax law, if employers were compelled to pay individuals' living expense that would have been incurred anyway, even without the pandemic," Weissman said.

Reimbursement for office furniture and supplies is much more straightforward. Items such as desks, chairs, computer hardware and other durables that businesses buy for employees' home office areas are 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 company office, Letizia said. If workers later want to buy these items, they should pay the depreciated value.

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Business expenses in California are reimbursed through accounts payable, not payroll. They should not be comingled with wages, Letizia said, so employers should provide separate checks or payments.

Payments to employees for remote-work utility expenses such as Internet can be handled as nontaxable expense reimbursements, Weissman said, provided the employer can justify how it arrived at the amount. However, some monthly payments—such as a car allowance that a traveling salesperson can put toward any type of vehicle regardless of actual cost—are likely still taxable as wages.

'Healthful and Safe'

California law requires employers to provide "a healthful and safe" work environment even when employees are working from home. A sound telework agreement should include language requiring remote workers to maintain a safe work environment and asking them to specify an area—whether it's a room or a space within a room, such as a dining room table—that is their designated workspace, Letizia said. If they wish, employers can ask to inspect workers' home workspaces to ensure those areas are free of hazards, he said.