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California Labor Code Section 2802 requires employers to reimburse employees for all necessary expenditures incurred in the discharge of their duties. This sounds straightforward. In practice, it’s a compliance minefield that generates significant PAGA litigation, creates unexpected costs for employers who haven’t budgeted for it, and extends to expense categories that most employers don’t think about as reimbursable — particularly in a remote work environment.
What Must Be Reimbursed
The California reimbursement obligation covers: business travel expenses (mileage at the IRS rate, airfare, lodging, meals when traveling for work); work-related supplies and equipment purchased by employees; professional dues, licenses, and subscriptions required for the job; home office expenses for remote workers — and this is the category that surprises most employers: cell phone expenses when employees use their personal phones for work; and internet service when employees work from home. The obligation is broad, non-waivable (employees cannot contract away their Section 2802 rights), and applies even if the employee chooses to incur the expense voluntarily.
The Remote Work Reimbursement Expansion
The remote work era significantly expanded Section 2802’s practical scope. An employee working from home uses their personal internet connection for work purposes — California courts and the DLSE have consistently held that this creates a partial reimbursement obligation. The employee’s home electricity usage increases when they work from home — there’s a reasonable argument that a portion of the electricity bill is reimbursable. The employee uses their personal cell phone for work calls and emails — definitely reimbursable under established California law.
Most California employers with remote workers have not established systematic reimbursement programs for these expenses. Many have learned about the obligation through PAGA demand letters rather than proactive compliance planning. Each unreimbursed expense is a Labor Code violation. With PAGA penalties of $100 per employee per pay period for initial violations, a two-year lookback period, and 50 remote employees each spending $50-$100 per month on reimbursable expenses, the exposure is substantial.
The Practical Compliance Approach
The most common compliant approach to cell phone and internet reimbursement is a fixed monthly stipend that represents a reasonable approximation of the work-related portion of the expense. For cell phones, a stipend of $30-$50 per month is typically defensible for employees who use their personal phones for work. For home internet, $25-$50 per month covers the incremental work-related portion in most scenarios. A written policy documenting the stipend program, the employer’s acknowledgment of the reimbursement obligation, and the methodology for calculating the stipend is essential.
For mileage, use the IRS standard mileage rate (currently $0.67 per mile) for all business miles driven. For other expenses, require receipts and document business purpose. The administrative cost of a compliant reimbursement program is modest. The cost of discovering the obligation through litigation is not.
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