Suit Tests Limits of California's Expense-Reimbursement Law

Author: Michael Cardman, XpertHR Legal Editor

June 3, 2022

A high-profile lawsuit against Amazon may decide whether California employers need to reimburse employees for remote work expenses even if they started working from home because of a government shutdown and not because of their employer's orders.

"This is the first time I'm aware of that any court has addressed the defense that, 'The government was the cause of the expense being incurred, not us,'" Craig J. Ackermann, shareholder for the firm representing the plaintiff, Ackermann & Tilajef, PC., told XpertHR.

The lawsuit also is notable for illustrating the limits of the protections afforded by business expense reimbursement policies in California. Even if an employee never submits a request for reimbursement, an employer may still be liable if it either knows or has reason to know that the employee has incurred a reimbursable expense.

Background of the Case

California's labor code - among the strictest in the nation - requires employers to indemnify employees for "all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of their duties, or of their obedience to the directions of the employer."

In a lawsuit filed last year, an Amazon employee claimed that he and others each incurred about $50 to $100 per month in home office expenses - including internet connections, equipment, electricity and home office infrastructure - necessary to perform their jobs from home.

The employees were not able to work at Amazon's Silicon Valley office but instead were required to work from home following California's coronavirus stay-at-home orders in early 2020.

Expenses Not Directly Caused by an Employer's Actions

Amazon recently moved to dismiss the case, arguing among other things that the employees' remote-work expenses were not caused by its actions, but rather by government orders. Allowing the lawsuit to proceed, the company said, would represent a "radical change" to the law by allowing employees to be compensated for personal injuries they incurred even if they were not the employer's fault.

On June 1, a federal district court denied Amazon's motion and allowed the lawsuit to proceed.

Even if the work-from-home expenses incurred by Amazon's employees were the result of government stay-at-home orders and not any action by Amazon, that does not absolve the company of liability, the court said. The fact that Amazon expected the employees to continue working from home after the stay-at-home orders were imposed is grounds enough for a plausible allegation even if Amazon itself was not the primary driver of the shift to remote work.

Knowledge That Employees Incurred Reimbursable Expenses

Amazon also argued that the lawsuit should be dismissed because it never knew or had reason to know about the expenses he claims to have incurred. He never submitted a request for reimbursement or did anything else to notify Amazon, for that matter.

Again the court denied Amazon, citing its own 2009 standard that what matters is not whether an employee makes a request for reimbursement but rather whether the employer either knows or has reason to know that the employee has incurred a reimbursable expense. If it does, it must exercise due diligence to ensure that each employee is reimbursed.

"Amazon, a major tech company, surely knew - or at the very least, had reason to know - that its software development engineers who worked from home during the pandemic were incurring basic costs related to that work," the court held.