Court Says Employers Must Reimburse Costs of Working from Home During the Pandemic

In an opinion with vast implications for employers whose employees worked from home during the pandemic, a California court has held that - despite government orders requiring business to operate remotely (and to "exclude" many employees during the pandemic) - employers are liable for virtually all incidental expenses associated with working at home.

In the case, a worker operated remotely during the COVID-19 pandemic due to California Governor Gavin Newsom's executive order requiring residents to stay at home except as needed to maintain critical industry sectors. The worker remained working at home due to the order, later suing for penalties under California’s Private Attorneys General Act ("PAGA") for violation of Labor Code section 2802(a), requiring reimbursement of "all necessary expenditures" that were "incurred by the employee in direct consequence of the discharge of his or her duties.” These included expenses such as internet access, telephone service, a telephone headset, and a computer and accessories.

The employer argued that it was not responsible for (or the "proximate" legal cause of) such expenses as they were caused by the state government's stay-at-home order. The court rejected this argument, holding: "the obligation does not turn on whether the employer’s order was the proximate cause of the expenses; it turns on whether the expenses were actually due to performance of the employee’s duties."

This case will have two immediate consequences. First, it certainly will lead to myriad new PAGA claims based not only on home-based work during the pandemic but also on all hybrid and telecommute employment. Second, it will open the door into a broader question as to which expenses must be reimbursed (internet, heat, desk space, electricity, insurance, etc.) and what proportion of such expenses must be paid. Plaintiff attorneys are likely to rely on prior state caselaw regarding mobile phone expenses, requiring reimbursement even where phone use created no additional cost for an employee (e.g., when employees have an "unlimited" mobile plan or their phone costs are paid by a family member).

Employers should keep an eye on developments following this case and consider whether certain work-at-home costs ought to be reimbursed retroactively. This may require approaching employees and asking them to estimate the costs associated with working at home. There is no good guidance on this issue yet.

The case, Thai v. International Business Machines Corp., can be viewed here.

Revise Arbitration Agreements to Cover PAGA Claims (or Suffer the Consequences)!

It has been clear for nearly a year that employers should adopt employment arbitration agreements covering claims under the California Labor Code Private Attorneys General Act (“PAGA”). While state courts long held PAGA to be exempt from arbitration, the United States Supreme Court disagreed in its 2022 Viking River Cruises, Inc. v. Moriana decision (available here).

Viking River Cruises, Inc. ended a dilemma faced by employers drafting effective arbitration agreements. While it was possible to include PAGA or use vague language referring to “representative” or “mass” claims, the strategy risked state-court refusal to enforce the rest of the agreement in non-PAGA cases. This made it almost impossible to craft language that did not either (1) "carve out" PAGA completely, or (2) include PAGA claims - risking the agreement’s enforceability.

Employment arbitration agreements should now be revised immediately, despite the effort needed to replace current language, to ensure PAGA coverage if necessary.

One recent California case highlights the urgency of this issue. In Duran v. EmployBridge Holding Co., an employer had excluded PAGA claims but argued that – under the rest of the agreement’s language – it ought to apply to an employee’s PAGA suit following the United States Supreme Court’s Viking River Cruises, Inc. decision.

The arbitration agreement did cover most non-individual claims, stating that neither the employee nor the employer would bring any “class action, collective action, or representative action claims against each other in arbitration, in any court, or otherwise.” This certainly would prevent against class-action claims by the employee given United States Supreme Court authority holding that – unless an employer expressly agrees – class claims cannot be made by employees covered by arbitration agreements.

The problem with the arbitration language was that it expressly excluded PAGA claims. Its only reference to PAGA stated:

“Claims for unemployment compensation, claims under the National Labor Relations Act, claims under PAGA and any claim that is non-arbitrable under applicable state or federal law arbitrable under this Agreement.”

Using this language was a reasonable decision before the Viking River Cruises decision. But relying on the agreement's express language, the court found that it had not changed and the PAGA exclusion still applied. As a result, the employee’s PAGA claim survived and was sent down for trial in civil court.

Duran v. EmployBridge Holding Co. highlights the urgent need for employers to revise their arbitration agreements now to clarify two issues.

First: the agreement expressly covers PAGA claims.

Second: the agreement allows an employee to bring only her own individual PAGA claim, excluding arbitration of all claims based on Labor Code violations allegedly suffered by other employees. This ensures that PAGA claims will remain a single-employee matter in employment arbitrations (though the California Supreme Court will soon consider the fate of PAGA claims based on employees other than the individual’s arbitration agreement in another case).

The case can be viewed here.

Policies and Agreements: Sometimes Too Much - is Too Much!

It can be very difficult to keep language straight when an employer presents different policies, and different agreements, to the same employees. One recent California appellate opinion highlights this issue.

In Playu Alberto v. Cambrian Homecare, the employer presented a caregiver with multiple agreements during her orientation. These included an arbitration agreement, a confidentiality agreement, and an "addendum" to the confidentiality agreement.

The problem? Inconsistency between the three agreements presented to an employee at one time. While the arbitration agreement applied to “all claims or controversies arising out of Employee’s . . . employment . . . or cessation of employment,” the confidentiality agreement required employees to “consent to the order of an immediate injunction … from any court of competent jurisdiction” – and included other employer-friendly provisions as well.

Noting that the arbitration agreement might have been enforceable on its own, the court nonetheless held that (1) it would be unfair to require arbitration of all an employee’s claims while allowing the employer to bring some important claims in court (in addition to other employer-friendly provisions), and (2) the arbitration and confidentiality agreements should be read together because they were presented at the same time as part of the same new employment relationship.

The result? An employer left facing a full civil PAGA/Class Action rather than a single-plaintiff arbitration.

This was a case of bad facts making bad law. But it provides an important lesson for all employers: policies should be considered together when presented to employees. Failure to consider the relationship between different policies or employee agreements, even those adopted years apart, can have a devastating effect when both are read together.

An aside: Employers should also carefully consider any ‘integration’ clauses stating that a policy is the “entire agreement” with an employee or “supplants any prior agreements.” This type of language, often placed in commission or severance materials, can destroy prior at-will, trade secret protection, or other important agreements with an employee.

The case, Jennifer Playu Alberto v. Cambrian Homecare, can be viewed here.