About six years into my legal career, I took a vacation to Mexico and came home with typhoid fever. Given how extremely contagious that particular illness is, my doctor instructed me to work from home for at least a month.
When I broke the news to my managing partner, you would have thought I had asked to dismantle the entire U.S. justice system. That scenario is comical today.
Fast forward a dozen (or so) years, and America was besieged by the COVID-19 pandemic. Not only could one lowly associate not work from the office, but all the associates in all the law firms in all the states were asked to work from home for the overall safety of our nation.
In this post, we’re going to first look at Federal and California laws that dictate whether and to what extent law firms (and other employers) must reimburse their employees for work-related expenses.
We will identify the types of expenses employers must currently pay and provide some guidance with respect to enacting workable reimbursement policies within your firm.
The remote work landscape for law firms
The legal landscape has been significantly changed in a myriad of ways because of work-from-home policies in California that are beyond the scope of this post.
Suffice it to say here that suddenly the home office was the new normal. While that may have caused a collective and dramatic gasp among managing partners, many of them soon saw the benefits of a remote workforce.
For one thing, law firms realized they might not need the massive real estate holdings they’d amassed over the years. Associates (and partners) were actually working effectively and efficiently from home.
This prompted many firms to dump good portions of that pricey office space and the costs associated with keeping them running. Talk about a silver lining!
About a year into the pandemic, however, employees began realizing that many of the costs formerly handled by the firm were now falling on them.
Not only was the endless supply of highlighters, printer ink, and post-it notes gone, but employees were finding that their utility and grocery bills were sneaking up more than they cared for.
Eventually, this prompted lawsuits, like the one in Los Angeles where employees sued their employers for reimbursement of all these new work-related expenses. Multiple similar lawsuits would follow, many of which are yet to be resolved.
The combination of these various work-from-home factors has resulted in murky waters for employers with respect to their reimbursement obligations.
Federal laws on reimbursement for remote work
On the federal level, there is no legislation specifically dictating employer reimbursement obligations. However, according to the Department of Labor, the Fair Labor Standards Act (FLSA) prohibits employers from requiring their employees to pay for remote work expenses if doing so would bring their compensation below the minimum wage.
This is how the DOL explains those provisions:
If the employer provides a computer to you or pays for an additional phone line for your home, for example, the employer may not require you to reimburse it for those costs if doing so reduces your earnings below the required federal minimum wage or overtime compensation due in any workweek.
This guidance begs the question — can a law firm require its employees to write reimbursement checks so long as their compensation remains above minimum wage after doing so?
Notwithstanding the logic of that reasoning, law firms in California would be wise not to test it. After all, the State of California is well known for its employee-friendly policy making.
California law on work-from-home reimbursement for remote work
California reimbursement law, at first glance, is relatively simple. Labor Code Section 2802 mandates employers to reimburse employees, “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.”
Thus, under California law, it’s easy to see how reimbursable expenses for remote work include things like:
- Internet and phone bills: A reasonable percentage of internet and phone bills if they are essential for work.
- Home office equipment: This could include desks, chairs, or other furniture necessary for a functional home office (reimbursement is more likely if the employee did not have or need these supplies before any remote work requirement).
- Computer and software: The cost of computers, software, and related peripherals needed for work.
- Supplies: Office supplies such as pens, notepads, and printer ink.
Nothing is ever as easy as it seems, however. Since the start of the pandemic, California employees have been rather creative in their demands for reimbursement.
Demands have included things like:
- Rental income employees could have collected on the space they now use as a home office.
- Costs of purchasing and preparing meals at home.
For now, litigants continue to battle over what the phrase, “Necessary expenditures or losses incurred … in direct consequence of his or her duties” means.
In the meantime, however, California law firms can lower their risks of being hit with one of these lawsuits by implementing well-reasoned best practices regarding their remote workforce.
Best practices for remote workers in California
While no employer was fully prepared for the shifts in working conditions that resulted from the pandemic, those who continue to require remote work can make things easier for the firm and its employees by doing the following:
Take time to consider “necessary expenditures”
Now that the pandemic panic is over, employers can take the time to fully consider which home office expenditures are truly necessary for their employees and then offer reimbursement for those costs upfront.
Making employees ask for obvious “necessary expenditures” will only foster distrust between law firm leadership and the employees.
Create clear written policies about what is reimbursable
Employees, like all people, appreciate certainty. By establishing written policies delineating items and services that are clearly reimbursable, employees know what to expect when they begin to work outside the office.
As a former litigator, I have to say that the idea of a corollary “Not reimbursable” list makes me cringe. Why invite scrutiny? Anything not explicitly approved as a reimbursable expense can be considered on a case-by-case basis.
Keep lines of communication open
Notwithstanding the pandemic, we’re all still relatively new to the concept of remote work as a regular way of doing business. Be sure to allow firm members to communicate openly about their needs.
Your particular practice may necessitate items or services that other firms have not implemented yet, and your employees are the only ones who will be able to discover these needs. Listen to them.
Require sufficient documentation from everyone
The firm’s accounting department has probably been clear on this point already, but you must require employees to keep receipts and records of their expenses.
Let employees know that these documents will be reviewed regularly to ensure that the claims are reasonable and necessary for work.
After this, make sure somebody actually reviews them from time to time. Ask questions when it is appropriate.
After all, you want to set the expectation that the firm is watching and that it is only approving reasonable and necessary expenses.
Don’t play favorites
It may be tempting to provide senior attorneys with certain home office luxuries while young associates, paralegals, and other employees are given bare-bones reimbursement packages.
If you want to do that, fine. After all, senior employees are regularly awarded greater benefits by virtue of their seniority.
Be careful, however, not to label those other perks as “necessary expenditures.” Otherwise, you may be opening the door for junior employees to argue those expenses should be reimbursable for everyone in the firm under California law.
Hold regular audits
The firm should not only perform periodic audits of expenses that are being reimbursed, it should also audit employee satisfaction with existing policies.
After all, times and technology are changing constantly. Something we may not even conceive of today may be a reimbursable necessity by this time next year.
Appoint a compliance czar
In California, maybe more than in any other state in the union, employment laws are constantly evolving, and this includes work-from-home policies in California.
This is particularly true in areas of the law (like remote work reimbursement) where the culture is changing rapidly. It’s one thing to enact a policy but it’s quite another to make sure that policy remains valid under California law.
Thus, whether you appoint an in-house attorney or hire someone from outside your firm, just make sure someone is watching these and other employment-related legal developments for compliance purposes.
Conclusion
We’ve all had time to adapt to the new remote working landscape. Nonetheless, now that the pandemic has cooled, every law firm has the time and ability to understand and absorb the laws concerning reimbursement.
Remember though, the pandemic drastically changed employee expectations when it comes to remote work. Barebones reimbursement policies may not be well received.
I hope this article has laid out for you the considerations you must make when it comes to work-from-home policies in California and more generally across the country.
Law firms can do themselves a huge favor by creating a supportive environment for remote workers while staying compliant with legal requirements.
