Expenses Incurred by Work from Home Employees


Labor Laws are now addressing specific reimbursement policies for remote workers 

During the height of the COVID-19 outbreak, at least 45 states and numerous local governments adopted shelter-in-place orders that required people to remain at home, except for when providing essential services. This caused an unprecedented number of employees to work remotely—a necessary arrangement that allowed their employers to continue operating. The costs of working remotely have now generated new types of employee expenses. When requiring employees to work from home, employers must be aware of potential legal obligations to reimburse employees for specific types of expenses incurred through remote work.  

The Cost of Working from Home – Necessities for Productivity 

According to Accounting Today, office supply expenses increased by 80% in March 2020 compared to March 2019. The most frequently expensed items have included desks, HDMI cables, laptops, monitors, keyboards, printers, ink cartridges and headphones as employees rushed to set up home offices. Determining what expenses are allowed or not allowed has become a hot topic in the business community and State Labor Boards.  

Reimbursement Obligations – Federal vs. State Requirements 

While there is no federal requirement to reimburse employees for business-related expenses, under the Fair Labor Standards Act (FLSA), employees cannot be required to directly pay or reimburse their employer for business-related expenses, if doing so would cause their wage rate to fall below the required minimum wage or overtime compensation thresholds. Since many states have no employee reimbursement laws, FLSA protection will apply. 

National Reimbursement Guidelines are Coming 

Some states, including California, the District of Columbia, Illinois, Iowa, Massachusetts, Minnesota, Montana, New Hampshire and New York, have legislation requiring reimbursement for necessary business expenses that apply to any work—be it remote or in the office.  Employers located in states not mentioned are not absolved of potential liabilities related to business expenses incurred by employees working from home. California Labor Code Section 2802 requires that an employer shall, “indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties.” 

As the country continues to curtail the spread of COVID-19, the reimbursement of remote workers’ expenses is becoming a significant factor when determining whether to allow, encourage, or require employees to work from home. When crafting a company policy, it may be wise to use California’s employee reimbursement standards, assuming that other states will likely consider using their  labor reimbursement requirements as legal precedent. 

Telecommuting Policy for Employees that Work from Home 

Even as the country begins to reopen, for many companies, remote work will become the “new normal.” Employers will need to update policies and handbooks to indicate how these types of expenses will be handled. Once State Labor Law obligations are absolute regarding reimbursements, all businesses must set clear guidelines for their employees. A well-drafted reimbursement policy for remote workers will include: 

  1. A list of approved expenses that are related to working remotely that the company will reimburse.  
  1. Procedures that employees must follow to be reimbursed, including the ability to request an appeal if they consider their reimbursement amount insufficient. 
  1. A cost-control process for prior approval of expenditures. Set a policy that requires advanced approval by a manager or supervisor before employees incur certain types of expenses, or, if they exceed a specific dollar amount. 
  1. Regular policy and accounting reviews to ensure that remote business expenses are relevant and appropriate.  

Have Questions? We’re Here to Help 

Need to update your company handbook with guidelines for remote workers, or create a new telecommuting expense policy? Call Cardinal’s HR specialists at (800) 342-4742 or email us at hr@cardinal-services.com to arrange a phone consultation.