By Christopher Hennessy and Jeremy Glenn

Law360 (April 10, 2020, 2:40 PM EDT )

Christopher Hennessy

Jeremy Glenn

As of this writing, at least 42 states, the District of Columbia, and Puerto Rico are under stay-at-home orders, meaning approximately 95% of Americans are restricted in one form or another from leaving home.[1] The number of states (and thus the percentage of Americans) has grown consistently ever since the governor of California issued the first such order on March 19.[2]

Setting aside those employees who work in "essential" businesses, that translates into a significant number of employees who are teleworking. Those new to the teleworking world may be relying on their home internet to remain connected to the workplace and to perform their jobs.

What this might mean for Illinois businesses in terms of expense reimbursement may be answered by reviewing two court opinions out of California, one issued late last month.

As previously discussed and evaluated in a Law360 guest article,[3] effective January 2019, Illinois amended its Wage Payment and Collection Act[4] to require that employers (with the exception of the state or federal governments) reimburse their employees for "all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer."[5] The statute defines "necessary expenditures" as "all reasonable expenditures or losses required of the employee in the discharge of employment duties and that inure to the primary benefit of the employer."[6]

Our prior analysis of the statute discussed the oft-cited case of Cochran v. Schwan's Home Service Inc.[7] Now, given the unprecedented surge in teleworking, further discussion is warranted in an effort to predict how Illinois courts may interpret Section 115/9.5(a) when evaluating reimbursement of potential costs associated with teleworking.

In Cochran, customer service managers sought reimbursement for personal cellphone costs when their positions required work-related calls from their personal cellphones. The employer argued that many employees had unlimited data plans and therefore incurred no additional expense when using their personal cellphones for work-related calls.

In interpreting Section 2802 of the California Labor Code (with language similar to what appears in Illinois Section 115/9.5(a)),[8] the court did not limit the reimbursement requirement to the "extra expense that [the employee] would not have incurred absent the job" but instead found that "reimbursement is always required."[9] In fact, at the very outset of the opinion, the Cochran court addressed the issue succinctly:

We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phones with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.[10]  

Thus, the Cochran court — at least as to personal cellphone bills — required the employer to pay "some reasonable percentage" with the calculation of reimbursement left to the trial court.[11]

In a more recent opinion — Herrera v. Zumiez — the U.S. Court of Appeals for the Ninth Circuit cited Cochran liberally in support of the "must pay some reasonable percentage" language.[12] In, Herrera, the court addressed a claim regarding personal cellphones but also commented on "personal expenses associated with internet service," noting "a ruling consistent with Cochran might require reimbursement of a portion of the bills."[13]

Thus even where an employee has home internet service with unlimited data, using that home internet service while teleworking could require reimbursement of "some reasonable percentage." At the same time, the court acknowledged the potential "reasonableness" limits that are based on an employee's choice.[14]

What might Cochran and Herrera tell us about how Illinois courts could interpret Section 115/9.5(a)? Certainly, the foundation already exists under the statute for the reimbursement of "reasonable expenditures," and required expenses related to teleworking may well come within the statutory purview.

Even where the employee was already incurring costs for home internet before the current massive transition to teleworking, the opinions in Cochran and Herrera suggest the reimbursement of "some reasonable percentage" of those costs. At the same time, there may well be limits associated with an employee's choice of internet service, as expenses must be "reasonable."[15]

In anticipation of potential reimbursement claims, Illinois employers should consider the following:

1. Employers should review their personnel manuals and policies — including anything recently issued related to teleworking during the COVID-19 pandemic — to identify all employee requirements, regarding home telephones, internet, software and hardware.[16]

2. Employers should confirm and circulate their written expense reimbursement policies, or codify any existing practice into a written policy. If such a policy exists, an employee must comply with the terms in order to be reimbursed.[17]

3. Employers that do not have a written reimbursement policy that establishes specifications for reimbursement for home internet and personal cellphones should keep in mind the "reasonable percentage" language from opinions like Herrera. While Illinois requires more than "de minimis" reimbursement under a written policy, the expenses still must be reasonable and incurred primarily for the benefit of the employer. With the proliferation of options for home internet, an argument can certainly be made that high-speed plans at the election of the employee are beyond the scope of that which is "reasonable."

The Illinois reimbursement statute is still new enough to lack a developed body of case law interpreting its provisions. Coupled with these unprecedented times and a significant number of employees teleworking, any prediction on the outcome of litigation becomes a challenge and requires viewing how similar provisions have been interpreted elsewhere. Employers should be as proactive as possible in interpreting, evaluating and codifying their reimbursement policies in anticipation of when reimbursement requests are made.

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Christopher Hennessy and Jeremy Glenn are members at Cozen O'Connor.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://www.nytimes.com/interactive/2020/us/coronavirus-stay-at-home-order.html.

[2] https://www.gov.ca.gov/wp-content/uploads/2020/03/3.19.20-attested-EO-N-33-20-COVID-19-HEALTH-ORDER.pdf.

[3] https://www.law360.com/employment/articles/1109641/new-reimbursement-obligations-for-ill-employers-in-2019.

[4] 820 ILCS 115/1.

[5] 820 ILCS 115/9.5(a).

[6] Id. (emphasis added).

[7] 228 Cal. App. 4th 1137 (2014).

[8] California Labor Code §2802(a) provides, in pertinent part, that "[a]n 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."

[9] 228 Cal. App. 4th at 1144.

[10] Id. at 1140 (internal citation omitted).

[11] Id. at 1144.

[12] Herrera v. Zumiez Inc. , -- F.3d ----, 2020 U.S. App. LEXIS 8660 (9th Cir., March 19, 2020).

[13] Id. at * 33 n. 10.

[14] "For example, where an employer is required to indemnify employees' automobile expenses, the employer does not have to indemnify unnecessary extra automobile expenses that are incurred based upon the choice of car and fuel." Id. at * 32; See also, Lawson v. PPG Architectural Finishes Inc. , No. 19-00705, 2019 U.S. Dist. LEXIS 128155, at *23 (C.D. Cal, June 21, 2019) (acknowledging the obligation to reimburse costs "necessary to the discharge of [the employee's] duties" but rejecting a claim for reimbursement of home internet costs when the employer provided the employee with a mobile hotspot, even though the home internet was a "faster connection" and "more convenient").

[15] For example, one prominent home internet provider currently offers introductory pricing ranging from $29.99 per month to $299.95 per month, depending on download speeds. https://www.cabletv.com/xfinity/internet.

[16] The opinions in Cochran and Herrera dealt with reimbursement for business use of personal cellphones. The court in Herrera left open the question not only of internet service but also of "a phone or computer." Herrera, 2020 U.S. App. LEXIS 8660, at * 33 n. 10. To the extent hardware or software expenses make working from home "more convenient," they may not be "necessary" and therefore not reimbursable. To the extent hardware or software expenses are "required of the employee in the discharge of employment duties," reimbursement would be required.

[17] 820 ILCS 115/9.5(b).

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