The Hidden Costs of Keeping CA Employees WFH
As the world turns, the work from home ("WFH") model is now more comfortable for most employers and employees. It cuts down on commute time, especially in Los Angeles where traffic dictates a large portion of one's used to be daily routine pre-COVID. There are pros and cons to the WFH model, with some experts for it and others against it. Some employees thrive being at home and working, others need work/ life separation for balance.
For those businesses, where WFH now seems like a viable and more suitable option for operations, California employment law has some strings to attach. Namely, the business expense reimbursement laws under the labor code require that employers reimburse employees for expenditures undertaken in the course of employment. This article will discuss what that looks like with a permanent stay at home model.
What are compensable business expenditures for WFH?
In California employees will need to be reimbursed for a reasonable percentage of their internet, phone, utilities and rent. Yes you read that correctly, utilities and rent. The employee now has to convert a portion of their living residence to be an "office." Even if they already had a desk and computer set up.
California sees it as, but for the employee having to work at home, they would not incur the extra expenses, and the employer should not benefit for free. Utilities, phone and internet make sense. However, because the employee now has an "office" at home the employer needs to compensate the employee for that work space, in lieu of providing an actual office. While there are no direct authorities on this, a risk averse employer would be well advised to over correct in this matter and cover a portion of an employee's rent.
Is it still cost effective to keep a WFH model then?
The answer to that is- it depends. I have seen many employers use 25% as the number for reasonable percentage. This may not be true for all employment situations, but for exemplary purposes I will use that. A breakdown of anticipated costs for 1 employee to work form home would be:
Rent: $2,274 (average cost of 1 br in LA) x 25%= $568.50
Utilities: $130 (average cost of utilities in LA) x 25%= $32.50
Internet: $50 x 25%= $12.50
Phone: $50 x 25%- $12.50
These amounts may be higher or lower depending on the employee. There is no hard and fast rule on what "reasonable percentage" means, and the courts have not addressed that with any more specificity in light of COVID 19. Keep in mind that total does not include the additional costs of office supplies like computers, printers, printer ink, writing utensils, paper etc. that will also need to be paid for by the employer. If an employee is using their personal computer or printer for work, anticipate paying a portion of the cost of those machines.
How to approach this with employees.
For small businesses, while the WFH sounds great in theory, the hidden costs associated with subsidizing an employee's personal residence may out weigh the benefits. Employers ultimately need to do a cost analysis of their own to determine if a permanent WFH strategy pencils out.
It is best to have a candid conversation with an employment attorney first to discuss the laws around your particular business and industry. An employment attorney can help you strategize how to approach employees, what to offer employees and how to address any questions or concerns from the employees within context of your business.
Keep in mind, local ordinances have laws about employee call backs, rehiring and new hiring that may impact your decisions on WFH. Employment laws are ever evolving. You don't want your well intentions to come back and haunt you because of laws you were not aware of.
If you are contemplating a permanent WFH model you should do your research and consult with an employment lawyer. Should you have any questions feel free to reach out to me- firstname.lastname@example.org | 818. 306. 0686. Visit my website struthers.legal and subscribe to my newsletter and follow me on twitter @Struthers_Legal for updates on employment laws.
The information in this post is for general information purposes only. Nothing on this post should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.