In 1872, California enacted the language that became the core of Labor Code section 2802(a), and that 154-year-old rule still decides whether a company owes remote employees for their internet and home equipment. Published decisions say yes when the job requires the expense, and for required personal cell phones, even if the employee would have paid the bill anyway. Exposure means unpaid amounts with interest and fees, plus civil penalties in a PAGA case, and a documented stipend is the main defense.
What does Labor Code section 2802 require?
Reimbursement of work costs the employee shouldn’t have to carry. Section 2802(a) says 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, or of his or her obedience to the directions of the employer” (the sentence continues with an exception for unlawful directions). Under subdivision (b), awards carry interest from the date the employee incurred the expense, and subdivision (c) defines necessary expenditures to include “all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.”
The employee can’t sign that right away. Labor Code section 2804 provides that “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void . . . .” A remote work agreement that says employees cover their own internet doesn’t protect the company.
According to the Court of Appeal in Thai v. International Business Machines Corp., the statute’s wording derives from similar language in former Civil Code section 1969, enacted in 1872. Courts construe it liberally. The same opinion called section 2802 “designed to protect workers from bearing the costs of business expenses that are incurred by workers doing their jobs in service of an employer,” quoting an earlier decision.
Do we have to pay for an employee’s personal cell phone?
Yes, if the job requires its use, and the amount is a reasonable share of the bill. In Cochran v. Schwan’s Home Service, Inc. (2014) 228 Cal.App.4th 1137, the Second District held that “when employees must use their personal cell phones for work-related calls,” section 2802 “requires the employer to reimburse them.” It added that “Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.”
The employer in Cochran argued that employees on unlimited plans had no extra cost to reimburse. The court rejected that, reasoning that otherwise “the employer would receive a windfall because it would be passing its operating expenses onto the employee.” It also said liability doesn’t depend on who pays the phone bill or whether the employee changed plans for work. On liability, the court wrote that “an employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.”
Cochran arose on class certification. The court reversed an order denying certification of about 1,500 service managers and sent the case back. That setting matters for employers: by making liability turn on whether phone use was required and unreimbursed, Cochran makes liability under a uniform policy a common question, though the court also noted that damages “raise issues that are more complicated.”
Do we owe home internet and equipment costs for remote employees?
The leading published decision holds that a government stay-at-home order doesn’t cut off the duty, at least where the company directed the work to be done from home. In Thai v. International Business Machines Corp. (July 11, 2023, A165390), a published First District opinion, IBM directed employees to keep working from home after the March 2020 stay-at-home order. The employees alleged they paid for internet and phone service at home, and for headsets and computer equipment, items the complaint suggested IBM supplied at its offices. The trial court sustained IBM’s demurrer to the PAGA claim without leave to amend, reasoning that the Governor’s order, not IBM, caused the expenses.
The Court of Appeal reversed. It held that the statute “flatly requires the employer to reimburse an employee for all expenses that are a ‘direct consequence of the discharge of [the employee’s] duties.’” 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.” In the court’s words, section 2802(a) “allocates the risk of unexpected expenses to the employer.”
Thai decided less than its headline result implies. The case came up on demurrer, so the court took the complaint’s allegations as true, and only the causation element was at issue. IBM didn’t dispute that these were the kinds of expenses it paid for at its offices. And it said in a footnote that it did “not consider what expenditures can be considered ‘reasonable costs’ of working from home (§ 2802, subd. (c)), or to what extent an employer must reimburse an employee for expenses incurred for both personal and work purposes.” Another footnote added that “it may be that the ‘direct consequence’ language is relevant in determining whether and to what extent expenses that an employee was already incurring for personal reasons are reimbursable under section 2802.” For work-from-home costs, those questions remain open. Cochran (phones) and Gattuso (cars) give the closest guidance on splitting personal and work use.
No published California decision yet squarely addresses a hybrid employee who chooses to work from home when an office desk is available. Thai turned on expenses “actually due to performance of the employee’s duties,” and an employer has a real argument that an optional home office isn’t. I wouldn’t count on winning it, though, if managers expect the work to get done from home on certain days.
Can a flat stipend satisfy section 2802?
Yes, if it’s set up correctly. In Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, a car-expense case, the Supreme Court of California approved paying reimbursement as a lump sum or even through higher salary or commission rates. Two conditions came with that approval.
First, if reimbursement is folded into salary or commissions, the company has to be able to show which part of the pay is reimbursement. The court said that “the employer must provide some method or formula to identify the amount of the combined employee compensation payment that is intended to provide expense reimbursement.” Second, the amount has to be enough. Comparing a lump sum with what the actual-expense or mileage method would yield, the court explained, “If the comparison reveals that the lump sum is inadequate, the employer must make up the difference.”
In my view, a written monthly stipend with a stated basis and an easy way to request more is the strongest position a remote-heavy employer can take. It answers the class allegation that nobody was reimbursed. It also turns the case into a dispute about whether the amount was enough, which is a damages question where the company has the numbers.
Which remote work expenses have courts addressed?
| Expense | Authority | What the employer owes | Where the defense lives |
|---|---|---|---|
| Personal cell phone required for work | Cochran (2014) | A reasonable percentage of the bill, even on unlimited plans | Whether use was required, and what percentage is reasonable |
| Home internet, phone service, headset, computer when directed to work from home | Thai (2023), on demurrer | Reimbursement of expenses due to performing the job | Reasonableness and personal/work apportionment, left open in Thai |
| Personal car used for work | Gattuso (2007) | Full reimbursement, by actual cost, mileage, or an identified lump sum | A stipend with a stated method, topped up when short |
| Items usable outside work, like ordinary clothing | Described in Thai (citing Townley v. BJ’s Restaurants (2019)) | Generally not reimbursable, though at least one federal court has questioned the scope | Whether the item is really personal |
Thai described Townley v. BJ’s Restaurants, Inc. (2019) 37 Cal.App.5th 179 as applying a rule that “generally usable” clothing need not be reimbursed, and noted a federal decision expressing doubt about that exception. I’d treat the generally-usable argument as a narrow one for home-office claims, since a work laptop or headset is hard to call personal.
What should we do when a reimbursement claim or PAGA notice arrives?
Expense claims often turn on payroll data and written policy. Start here:
- Preserve the reimbursement policy and every prior version, remote work agreements, stipend records, expense reports, and the payroll data showing what was paid and when.
- Calendar the deadline on the demand letter, PAGA notice, or complaint, and check for an arbitration agreement and any employment practices liability (EPLI) policy notice terms.
- Identify who decided where employees would work and what equipment they would use, and make sure no one disciplines or reassigns the complaining employee in a way that could look like retaliation.
- Pull the documents that show whether home work was required or optional, what employees actually used, and how any stipend amount was set.
- Talk to a lawyer before responding, before contacting the employee or the employee’s lawyer, and before changing the policy mid-dispute or offering anything to settle.
PAGA, the Private Attorneys General Act, lets an employee seek civil penalties for Labor Code violations on the State’s behalf, and Thai itself was a PAGA case. The firm’s page on California wage and hour defense explains how reimbursement claims are evaluated alongside the wage claims they usually travel with.
Remote work reimbursement questions from employers
Do we have to reimburse if the employee would pay for internet anyway?
Probably in part, but this is unsettled. Cochran held that reimbursement for a required personal cell phone is owed even when the employee incurs no extra cost. Thai suggested the answer may differ for expenses the employee was already incurring for personal reasons, and left open how to split personal and work use, so the amount can still be disputed. A reasonable percentage, stated in writing, is easier to defend than nothing.
Can the remote work agreement say employees cover their own costs?
No. Labor Code section 2804 voids any agreement by an employee to waive the benefits of section 2802. The agreement can set a reimbursement method, an amount, and a process for documenting higher costs. It can’t make the obligation disappear, and a clause that tries may become exhibit A in a PAGA case.
Is a fixed monthly stipend enough?
It can be. Gattuso allows a lump sum, requires the employer to make up any shortfall when it falls below what full reimbursement would be, and requires an identified reimbursement amount when reimbursement is folded into pay. Pick an amount you can explain, review it periodically, and give employees a way to submit costs above it. Keep the records showing how the figure was set.
Does it matter that remote work was the employee’s choice?
It may. Thai involved employees told to keep working from home, and its test asks whether the costs were actually due to performing the job. No published decision has yet resolved the purely optional case. If the company offers an office and lets employees choose, document that choice. But a manager’s expectation that work happens at home on certain days undercuts the argument.
If a former employee is demanding back reimbursement
If your company has received a demand letter or PAGA notice claiming it never paid for remote employees’ phones or internet, the stipend records and the written policy usually decide how much of the claim is real. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving unreimbursed business expenses. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code section 2802 and Labor Code section 2804. The opinions are Cochran v. Schwan’s Home Service, Inc. (2014) 228 Cal.App.4th 1137, Thai v. International Business Machines Corp. (July 11, 2023, A165390), both published, and Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554.
This post is general information about California and federal employment law as of November 5, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.