Even though the COVID-19 pandemic is over, the legal issues that remain in its wake are far from finished. A California case released last week, which decided whose responsibility it is to pay the expenses for work that had to be performed at home, is another one.

Paul Thai, an employee of the International Business Machines Corporation (IBM), sued his employer for failing to reimburse him for the supplies he needed to do his job from home. The company ordered him to work at his residence after California Governor Gavin Newsom signed an Executive Order in March 2020 that required all state residents to stay home unless the work they were doing was “critical” and needed to be done on-site.

Thai and other IBM plaintiffs sued, but they lost in the trial court when San Francisco Superior Court Judge Anne-Christine Massullo agreed with IBM that it was Newsom’s order, not IBM’s, that forced employees to do their jobs from home. She ruled that the plaintiffs could not show that IBM’s instructions to stay home were the “direct cause” of the employees’ expenditures and concluded that “IBM was acting in response to government orders, (so) there was an “intervening cause precluding direct causation by IBM.” Plaintiffs appealed.

The California Court of Appeal from Division Five of the First Appellate District unanimously reversed Massullo’s decision on July 11, finding IBM, not Newsom, responsible for paying plaintiff’s job-related expenses. The opinion was authored by Justice Mark B. Simons.

After Newsom’s order, Thai and thousands of other IBM employees prepared to continue doing their jobs remotely. In order to do so, Thai needed internet access, telephone service, a telephone headset, a computer and related items, all of which had normally been provided to him by his company. Thai personally purchased all needed equipment, but IBM never reimbursed him or his co-workers, even though the company knew they incurred significant out-of-pocket expenses.

Thai sued under California’s Private Attorneys General Act (PAGA) for an alleged violation of the Labor Code which “requires an employer to reimburse employees for all necessary expenditures incurred by the employee in direct consequence of the discharge of his or her duties.” Plaintiff’s case grew out of a similar suit by another employee, Umair Javed, who filed a PAGA claim on behalf of the California Labor and Workforce Development Agency. Thai joined after Javed filed two amended complaints. Thai and other plaintiffs sought penalties on behalf of all IMB employees who were ordered to stay at home by Newsom.

Simons’ opinion explained that the words and meaning of PAGA’s statutory language were “clear” and “plain.” Its relevant section says, “An 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 . . .” Necessary expenses include “all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.”

IBM’s arguments against payment centered on one necessary element of a successful PAGA suit, i.e., the one that requires that “the expenditures or losses were incurred in direct consequence of the employee’s discharge of his or her duties, or obedience to the directions of the employer…” The company argued that Newsom’s order was “an intervening cause, foreclosing any possible allegation that IBM was the direct cause.”

IBM took issue with the word “direct,” arguing that the dictionary definition of the word says it is “Marked by an absence of an intervening agency, instrumentality, or influence.” Simons disagreed, writing that IBM’s “analysis involved a sleight of hand… (because) the statute makes clear that the expenses at issue must actually be a consequence of the work duties…” which they were.

In addition, the opinion found that IBM’s interpretation of PAGA injected a “tort-like causation inquiry” into the analysis that was clearly not intended by PAGA’s plain language that “flatly requires the employer to reimburse an employee for all expenses.” Simons distinguished IBM’s cited precedents by deciding that, unlike other defendants, the work plaintiffs performed was clearly for IBM’s benefit, did not involve job “training” costs, and did not relate to “personal protection costs,” such as masks and hand sanitizer. Also, IBM did not dispute that it paid for all similar equipment when employees did their work at IBM locations.

The case was remanded and plaintiffs received costs. Now, Thai and other employees of the company that generated $60.5 billion in revenue in 2022 can get reimbursed for the work they had to do at home.