Skip to main content

Nixon Peabody LLP

  • People
  • Capabilities
  • Insights
  • About
Trending Topics
    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    Practices

    View All

    • Affordable Housing
    • Community Development Finance
    • Corporate & Finance
    • Cybersecurity & Privacy
    • Entertainment & Media
    • Environmental
    • Franchising & Distribution
    • Government Investigations & White Collar Defense
    • Healthcare
    • Intellectual Property
    • International Services
    • Labor, Employment, and Benefits
    • Litigation
    • Private Wealth & Advisory
    • Project Finance
    • Public Finance
    • Real Estate
    • Regulatory & Government Relations
    Industries

    View All

    • Aviation
    • Cannabis
    • Consumer
    • Energy
    • Financial Services
    • Healthcare
    • Higher Education
    • Infrastructure
    • Manufacturing
    • Nonprofit Organizations
    • Real Estate
    • Sports & Stadiums
    • Technology
    Value-Added Services

    View All

    • Alternative Fee Arrangements

      Developing innovative pricing structures and alternative fee agreement models that deliver additional value for our clients.

    • Continuing Education

      Advancing professional knowledge and offering credits for attorneys, staff and other professionals.

    • Crisis Advisory

      Helping clients respond correctly when a crisis occurs.

    • DEI Strategic Services

      Providing our clients with legal, strategic, and practical advice to make transformational changes in their organizations.

    • eDiscovery

      Leveraging law and technology to deliver sound solutions.

    • Environmental, Social, and Governance (ESG)

      We help clients create positive return on investments in people, products, and the planet.

    • Global Services

      Delivering seamless service through partnerships across the globe.

    • Innovation

      Leveraging leading-edge technology to guide change and create seamless, collaborative experiences for clients and attorneys.

    • IPED

      Industry-leading conferences focused on affordable housing, tax credits, and more.

    • Legal Project Management

      Providing actionable information to support strategic decision-making.

    • Legally Green

      Teaming with clients to advance sustainable projects, mitigate the effects of climate change, and protect our planet.

    • Nixon Peabody Trust Company

      Offering a range of investment management and fiduciary services.

    • NP Capital Connector

      Bringing together companies and investors for tomorrow’s new deals.

    • NP Second Opinion

      Offering fresh insights on cases that are delayed, over budget, or off-target from the desired resolution.

    • NP Trial

      Courtroom-ready lawyers who can resolve disputes early on clients’ terms or prevail at trial before a judge or jury.

    • Social Impact

      Creating positive impact in our communities through increasing equity, access, and opportunity.

    • Women in Dealmaking

      We provide strategic counsel on complex corporate transactions and unite dynamic women in the dealmaking arena.

    1. Home
    2. Insights
    3. Alerts
    4. California Court rules on COVID reimbursement for remote work during Pandemic

      Alerts

    Alert / Labor & Employment

    California Court rules on COVID reimbursement for remote work during Pandemic

    July 24, 2023

    LinkedInX (Twitter)EmailCopy URL

    By Alice Kwak

    In Thai v. IBM, the court held that mandatory “stay-at-home” order did not cut off IBM’s obligation to reimburse for ordinary work materials it provided in offices pre-pandemic.

    What’s the impact?

    • The ruling is not as broad as may appear on its face—it did not set forth a rule that all COVID expenses are reimbursable, the “standard of review” of the Court of Appeal.
    • Employers who implemented remote work policies due to Newsom’s “stay-at-home” order now have a better understanding of how the government’s mandate fits into the defence of a COVID-reimbursement claim.
    • Employers should consider preserving information and/or evidence about COVID-related work expenses that employees may have incurred during the pandemic.

    DOWNLOAD

    PDF: CA Court rules on COVID reimbursement for remote work

    Introduction

    With COVID barely in the rearview mirror, lawsuits regarding expense reimbursements incurred by employees during the pandemic are starting to reach the California Courts of Appeal, and thus a body of caselaw is finally starting to form. A recent decision by the California Court of Appeal, Thai v. International Business Machines Corporation, sheds light on an important threshold issue of “COVID-Reimbursement Law”: whether Gavin Newsom’s Executive “stay-at-home” Order is a “superseding cause” that cuts off reimbursement liability, or in English:

    Does the fact that employees incurred expenses while working from home was the direct cause of the “stay-at-home,” cut off an employer’s liability for legally reimbursable expenses?

    Thai v. IBMis an appeal of a “demurrer” and that’s important

    Courts analyze cases in several stages, including (but not limited to) (1) the pleadings stage, (2) the summary judgment stage, and (3) trial stage. Each stage has its own “burdens of proof” (i.e., how much evidence) that each party must meet to either move the case forward (i.e., get to a trial), or end it before a trial.

    The first stage of the process, sometimes called the “pleadings stage” involves a complaint filed by a plaintiff, and some sort of “responsive pleading” to that complaint. A responsive pleading can be an answer (i.e., we deny everything and here are other reasons why you lose), a motion to compel (i.e., this case should be in arbitration), or a “demurrer” (i.e., even if everything you say is true, you can’t win because [case, regulation, other]). Thai is a case of the lattermost variety.

    Plaintiff Thai filed a complaint alleging that IBM had failed to reimburse him for business expenses that (a) he actually incurred, and (b) for things that IBM had previously provided him while in the office (i.e., access to internet).

    IBM argued that Thai’s complaint should be completely thrown out (i.e., filed a demurrer) on the basis that it could not be held liable for the expenses Thai incurred—because of the “stay at home order.” In law, this is sometimes called a “superseding cause.”

    What is a demurrer?

    As explained above, a demurrer is a legal motion used by one party in a lawsuit to argue that even if all the facts presented by the other side are true, they still cannot win the case based on the law (the “Demurrer Standard”).  Understanding the "demurrer standard" is important because if a party fails to prevail on a demurrer, it doesn't mean they have lost the entire case based on the facts and arguments presented.

    The story of Derrick Driver, the 18-Wheeler, & the T-Rex

    Derrick Driver gets distracted while driving a sedan and hits a parked 18-wheeler. Due to the force of the collision, the 18-wheeler starts rolling toward a cliff. If the 18-wheeler continues rolling, falls off, and is destroyed, Derrick Driver was the “but for” cause of the accident and must pay damages. However, let’s imagine that before the 18-wheeler falls off the cliff—it is destroyed by a meteor, flash flood, lightning bolt, or T-Rex. Such an unexpected event occurring after Derrick hit the 18-wheeler may “cut-off” his liability for the destruction of the 18-wheeler. That is called a “superseding” cause.

    IBMs argued that the "stay-at-home" order was like a superseding cause, meaning it eliminated IBM's obligation to reimburse Thai for his expenses. In simpler terms, IBM was claiming that even if Thai was right about being entitled to reimbursement, the "stay-at-home" order canceled that obligation.

    What’s the Impact?

    In this situation, it’s more helpful to begin with what Thai does not mean for employers.

    Thai court said is that the “stay-at-home” order is not an automatic “get-out-of-reimbursement-free” card for IBM. The “stay-at-home” order remains relevant to the question of “merits liability,” i.e., whether IBM had the legal obligation to reimburse Mr. Thai for the expenses at all. (See Footnote 11 [“[A]lthough we need not address the issue in the present appeal, 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.”].)

    The upshot is that employers can still argue that certain pandemic-driven remote-work expenses do not need to be reimbursed, and the “stay-at-home” will be relevant to that question of “whether to reimburse at all.” How much weight courts should, or must, give the fact that the “stay-at-home” was not an employer’s choice or option appears to remain an open question.

    Take Aways

    The lesson employers should take away from Thai is this: if you are facing a COVID expense reimbursement claim, do not rely solely on the “stay-at-home” order for your defense. Rather, employers may want to consider investigating (1) what expenses its employees actually incurred for remote work in the pandemic, and (2) which of those expenses were “reasonable and necessary” for the execution of their job duties under existing law—versus expenses that are personal and/or do not directly benefit the employer. (Note: The Thai court expressly reserved the question of “whether it is appropriate to separately consider whether actual expenses incurred in performance of work duties were for the employer’s ‘benefit’” for another day, if ever.)

    Get Compliant

    As is often the case in California “wage-and-hour” law, the best defense is to fully comply.

    Simple? Yes. Easy? No.

    Nixon Peabody’s lawyers have extensive experience in the preparation, review, and analysis of reimbursement policies, as well as in defending against COVID-reimbursement claims in arbitration and court. Our dedicated team of California labor and employment attorneys are ready, willing, and able to guide you through the web of complexities, of which reimbursement obligations is only one small strand. If you have questions about the Thai decision, COVID reimbursements, etc., please do not hesitate to reach out to the authors of this article.

    Conclusion

    The Thai v. IBM decision provides much-needed guidance for employers grappling with reimbursement obligations during remote work. While the court’s ruling centers on the pleading stage and the impact of government stay-at-home orders, it emphasizes that employers must fulfill their reimbursement responsibilities under Section 2802.

    Employers should consult legal counsel to ensure compliance with reimbursement obligations and navigate the complexities of remote work scenarios. As this area of law continues to evolve, staying informed and proactive will be crucial for employers in California.

    Locations

    Los AngelesSan Francisco

    Practices

    Labor, Employment & BenefitsCalifornia Labor & EmploymentLabor Relations

    Insights And Happenings

    • Alert

      Looking ahead — New laws for California employers in 2024

      Dec 12, 2023
    • Alert

      Update—Deadline extension for California’s minimum wage law for healthcare workers

      Oct 30, 2023
    • Alert

      California Non-Compete Law: California strengthens its ban on non-compete agreements

      Oct 9, 2023
    The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

    Subscribe to stay informed of the latest legal news, alerts, and business trends.Subscribe

    • People
    • Capabilities
    • Insights
    • About
    • Locations
    • Events
    • Careers
    • Alumni
    • Cookie Preferences
    • Privacy Policy
    • Terms of Use
    • Accessibility Statement
    • Statement of Client Rights
    • Purchase Order Terms & Conditions
    • Nixon Peabody International LLC
    • PAL
    © 2025 Nixon Peabody. All rights reserved