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C.A. Reinstates PAGA Action Against IBM for Not Paying Expenses of At-Home Employees

Opinion Rejects View That Governor’s COVID Order Absolved Employers of Duty Under Labor Code

By a MetNews Staff Writer

The First District Court of Appeal yesterday ordered reinstatement of an action against IBM under the Labor Code’s Private Attorneys General Act based on failing to pay employees’ expenses incurred in working from home during the period when an emergency stay-at-home order, issued by Gov. Gavin Newsom, was in effect at the peak of the COVID-19 pandemic.

San Francisco Superior Court Judge Anne-Christine Massullo had ruled that it was Newsom’s March 2020 order, not IBM’s directive to employees, that caused the need for employees to utilize their home computers and telephones. She sustained a demurrer without leave to amend to a complaint brought by Paul Thai others, and a judgment of dismissal ensued.

Reversal came in an opinion by Justice Mark B. Simons of Div. Five.

Labor Code Section

At issue was the applicability of Labor Code §2802(a) which requires an employer to reimburse an employee “for all necessary expenditures . . . incurred by the employee in direct consequence of the discharge of his or her duties.” Rejecting Massullo’s view that Newsom’s order was an “intervening cause precluding direct causation by IBM,” he wrote:

“The court and IBM read the statute as if it requires reimbursement only for expenses directly caused by the employer. But that inserts into the analysis a tort-like causation inquiry that is not rooted in the statutory language….Instead, the plain language of section 2802(a) flatly requires the employer to reimburse an employee for all expenses that are a ‘direct consequence of the discharge of [the employee’s] duties.’ Under the statutory language, 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.”

The jurist continued:

“It may be true that the Governor’s March 2020 order was the ‘but-for’ cause of certain work-from-home expenses, but nothing in the statutory language can be read to exempt such expenses from the reimbursement obligation. Effectively, section 2802(a) allocates the risk of unexpected expenses to the employer, which is consistent with the Legislature’s intent in adopting the statute.”

Definition of ‘Direct’

IBM pointed to a dictionary definition of “direct” as “marked by absence of an intervening agency, instrumentality, or influence,” arguing:

“This dictionary definition makes clear that only expenses directly caused by the employer—without any intervening cause—are covered by section 2802.:

Simons responded:

“But that analysis involves a sleight of hand: section 2802(a) refers to expenses that are the ‘direct consequence of the discharge of [an employee’s] duties,’ not to expenses that are ‘directly caused by the employer.’ Thus, while the suggested definition of ‘direct’ is appropriate, the use of the term in the statute makes clear that the expenses at issue must actually be a consequence of the work duties, rather than due to something else.”

The case is Thai v. International Business Machines Corp., 2023 S.O.S. 2415.