Legal Research Assistant

Research Memo: Does California Labor Code § 2802 require reimbursing out-of-state remote employees?

To: In-House HR / Legal Re: Whether Labor Code § 2802 requires reimbursement of home internet and cell phone costs for fully remote employees who live and work outside California Date: September 23, 2026

Disclaimer: This is general legal research, not legal advice. A licensed California employment attorney should confirm these conclusions before anyone relies on them. Citations marked [VERIFY] could not be fully confirmed against a primary source during this research and must be checked in Westlaw or Lexis. All citations should be Shepardized/KeyCited before use.

I. Executive Summary

Short answer: Probably not. Section 2802 very likely does not require reimbursement for internet and phone costs that a fully remote employee incurs while living and working entirely outside California. That holds even when the employer is headquartered in California and the employment agreement picks California law. But the question isn't fully settled. No published California appellate decision we found applies § 2802 to this exact situation. The answer rests on a presumption against applying state law outside state borders, applied statute by statute, and a few facts can change the outcome.

Key authorities:

1. Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732 (primary). California presumes its statutes apply only inside the state. Each Labor Code provision is analyzed on its own. Under this test, the wage-statement law (§ 226) covers employees whose principal place of work is California.
2. Saberin v. Alation, Inc. (Cal. Ct. App., 1st Dist., Div. 5, filed July 30, 2026, No. A174549, certified for publication) (primary; official reporter cite still pending). A remote employee in Utah could not invoke California employment statutes against his California-headquartered employer. The court held that neither the headquarters location nor a California choice-of-law clause was enough.
3. O'Connor v. Uber Technologies, Inc. (N.D. Cal. 2014) 58 F.Supp.3d 989 and Cotter v. Lyft, Inc. (N.D. Cal. 2014) 60 F.Supp.3d 1059 (primary but only persuasive, since they are federal trial-court decisions). Both held that §§ 351 and 2802 did not reach people working only in other states, despite California choice-of-law clauses.
4. Thai v. International Business Machines Corp. (2023) 93 Cal.App.5th 364 [VERIFY page cite] (primary). Employers must reimburse the costs of working from home, including internet and phone. This is the rule for employees working in California.
5. Cochran v. Schwan's Home Service, Inc. (2014) 228 Cal.App.4th 1137 (primary). When employees must use personal cell phones for work, the employer owes a "reasonable percentage" of the bill, even on unlimited plans.

Risk assessment in plain terms:

Practical bottom line: Excluding out-of-state employees from § 2802 is legally defensible. For a nationwide policy, though, a uniform, documented stipend for internet and phone is often cheaper to administer than tracking each state's rules. It also removes most of the edge-case risk described below.

II. Framing the Issue

Question presented: Does § 2802(a) require a California-headquartered employer to reimburse home internet and cell phone costs for fully remote employees who live and perform all or nearly all of their work outside California?

Sub-issues:

1. Substance: If § 2802 applies, are home internet and cell phone costs "necessary expenditures" that must be reimbursed?
2. Territorial reach: Does § 2802 cover out-of-state work, and what connection to California triggers it?
3. Contract: Does a California choice-of-law clause in an offer letter, agreement, or handbook extend § 2802 to out-of-state employees?
4. Mixed facts: How do partial California work, HQ-based decision-making, and residence ambiguity affect the answer?
5. Other regimes: What do federal law (FLSA) and other states' laws require regardless of § 2802?

III. Detailed Analysis

A. Sub-issue 1: If § 2802 applies, internet and phone costs are covered

Statute (primary): Cal. Lab. Code § 2802(a): "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…" Subdivision (b) adds interest on awards. Subdivision (c) defines "necessary expenditures or losses" to include "all reasonable costs, including, but not limited to, attorney's fees incurred by the employee enforcing the rights granted by this section." Last amended by Stats. 2015, ch. 783 (AB 970), effective January 1, 2016. We found no amendment to § 2802 since 2023.

Related statute (primary): Cal. Lab. Code § 2804 makes § 2802 rights non-waivable, so an employee cannot sign away reimbursement by agreement. [VERIFY exact text]

Case law (primary):

• Cochran v. Schwan's Home Service, Inc. (2014) 228 Cal.App.4th 1137. If employees must use personal cell phones for work calls, the employer owes "a reasonable percentage" of the bill, even if the employee's plan is unlimited and work calls add no cost. The court did not say what percentage is reasonable.
• Thai v. International Business Machines Corp. (2023) 93 Cal.App.5th 364 [VERIFY cite] (1st Dist., July 11, 2023, No. A165390). This reversed a demurrer that had held COVID stay-at-home orders were an intervening cause excusing reimbursement. The court said liability "turns on whether the expenses were actually due to performance of the employee's duties," not on whether the employer caused the remote arrangement. The expenses at issue included internet, phone, and computer equipment.
• Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554 [VERIFY pin cites] (primary). Employers can meet § 2802 with lump-sum payments or increased pay, as long as the amount actually covers necessary expenses. This matters if the policy uses a flat stipend.

Conclusion: For employees covered by § 2802, required home internet and personal cell phone use must be reimbursed, at least in reasonable proportion. The real question for out-of-state employees is territorial reach, not substance.

B. Sub-issue 2: Territorial reach of § 2802

1. The presumption against extraterritoriality (primary). In Ward v. United Airlines, Inc. (2020) 9 Cal.5th 732, the California Supreme Court described "a presumption that state law is intended to apply only within state borders." It also said reach is decided statute by statute, based on "the statutory text, the statute's purpose and role in the surrounding statutory scheme, and its legislative history." Commentators summarize the key principle as: "A connection sufficient for one statute may not be sufficient for another" (quoted in the Mayer Brown commentary below; confirm against the opinion). For § 226 (wage statements), the Court held the statute applies if the employee's principal place of work is California. That means the employee works a majority of the time in California or, for interstate transportation workers who don't work a majority anywhere, has a California base of work operations.

2. Companion and earlier cases (primary):

• Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191. California overtime law applies to full days and weeks of work performed in California by nonresidents working for a California employer. The logic points the other way for out-of-state work: the physical location of the work matters.
• Oman v. Delta Air Lines, Inc. (2020) 9 Cal.5th 762. Section 226 "generally does not apply to employees who work in California only episodically and for less than a day at a time."
• Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557 [VERIFY] is the earlier foundation for territorial limits on California wage law. Confirm how it applies.

3. Section 2802 specifically:

• O'Connor v. Uber (58 F.Supp.3d 989, 1005–06) and Cotter v. Lyft (60 F.Supp.3d 1059) both held that § 2802 (and § 351) did not reach drivers who worked only in other states. Choice-of-law clauses naming California did not change that. These are federal trial-court rulings. They persuade but do not bind California courts, and they predate Ward.
• The Court of Appeal in Saberin (2026) cited O'Connor and Cotter approvingly, according to the Hunter Pyle commentary. Confirm this in the opinion text. It gives these federal rulings recent state appellate support.
• Gap: We found no published California appellate decision that sets a § 2802-specific test under Ward (for example, "principal place of work" versus "where the expense was incurred"). Commentators assume the Ward § 226 approach carries over to reimbursement, but that is an inference, not a holding.

Application: An employee who lives and works in Colorado and pays for Colorado internet and phone service incurs those costs outside California, and the work is done outside California. Under any likely test (where the work is done, principal place of work, or where the expense arises), § 2802 almost certainly does not reach those costs.

C. Sub-issue 3: Choice-of-law clauses

Saberin v. Alation, Inc. (Cal. Ct. App., 1st Dist., Div. 5, July 30, 2026, No. A174549) (primary). The facts: a Utah-based remote engineer at a California-headquartered company was arrested in Florida and fired by executives who were physically in Illinois, with a California HR employee giving input. The court affirmed judgment for the employer on his Labor Code § 432.7 and Gov. Code § 12952 claims. Holdings, as reported by commentators (verify quotes against the slip opinion):

• "a contractual provision selecting California law incorporates all of California law, including the presumption against extraterritoriality," unless the contract says otherwise.
• Headquarters in California is not, by itself, a sufficient connection.
• The court looked at "the location and substance of the employer's conduct—including who made or substantively participated in the challenged decision."
• The court expressly did not decide how California-resident remote workers would be treated.

This follows the choice-of-law reasoning in O'Connor and Cotter.

Caution on drafting: Saberin turned on a general choice-of-law clause. A contract that expressly promises California Labor Code benefits, including reimbursement, to all employees wherever they are could create a contractual obligation even where the statute doesn't reach. Review offer letters, handbooks, and arbitration agreements for that kind of language.

Labor Code § 925 (primary) limits out-of-state choice-of-law and forum clauses for employees who "primarily reside and work in California." It protects California-based employees and does not extend California law to out-of-state employees. [VERIFY text]

D. Sub-issue 4: Counterarguments and fact-dependent risks

1. "The employer's conduct happens at California HQ." Saberin focused on where the employer's decision was made. A plaintiff could argue that a nationwide policy denying reimbursement, set and run from California headquarters, is California conduct. Responses: Ward rejected a headquarters-based test for § 226, O'Connor and Cotter rejected it for § 2802, and a reimbursement claim is about the employee's work, not a one-time employer decision like a termination. Risk: low, but not zero, and not yet tested.
2. Work performed in California. Under Sullivan's reasoning, costs "in direct consequence" of work done in California (extended HQ visits, working from California during long stays) are arguably covered. Travel costs for required California trips are a separate reimbursement issue.
3. Where the employee actually is. Employees who claim an out-of-state address but actually work from California are covered under Thai. Location tracking and attestations matter.
4. Legal developments. Saberin was filed July 30, 2026. Check whether a petition for review was filed with the California Supreme Court and whether the opinion is still published.

E. Sub-issue 5: Federal law and other states

• FLSA (primary): Federal law has no general expense-reimbursement requirement. Under 29 C.F.R. § 531.35 ("free and clear" wages), however, costs the employer shifts to the employee cannot push a non-exempt employee's effective pay below minimum wage. This matters mainly for low-wage non-exempt remote staff. [VERIFY current regulation text]
• Other states: Several states and jurisdictions have their own reimbursement laws. Illinois is the best known (820 ILCS 115/9.5); commentators also cite Iowa, Minnesota, New Hampshire, Montana, South Dakota, and D.C. [VERIFY each; we did not confirm these in this research.] An out-of-state employee who falls outside § 2802 may still be covered by their home state's law.

IV. Secondary Sources (commentary, not binding)

• Davis Wright Tremaine, California Court Limits Reach of State Employment Laws for Out-of-State Remote Workers (Aug. 2026)
• Mayer Brown, Does California Employment Law Follow Workers Across State Lines? (Sept. 2026). Covers Sullivan, Ward, Oman, and Saberin. It does not specifically analyze § 2802.
• National Law Review, When Does California Employment Law Follow a Remote Worker Out of State? Lessons from Saberin v. Alation
• Hunter Pyle Law, Do California's Discrimination Laws Apply to Remote Workers? (July 2026). Reports that Saberin cited O'Connor and Cotter.
• Proskauer, California Employment Law Update on Thai (July 2023)
• Advocate Magazine, Golden State Boundaries (Nov. 2024). Cites O'Connor on §§ 351 and 2802.
• Treatises to check (not reviewed here): Wilcox, California Employment Law (LexisNexis) and Chin et al., Cal. Practice Guide: Employment Litigation (Rutter), chapters on reimbursement and extraterritoriality. [Verify current editions and sections]

V. Open Questions and Next Steps

1. Pull the Saberin slip opinion (courts.ca.gov, A174549) to confirm quotes, the citation to O'Connor and Cotter, and any wording about wage-hour statutes. Check whether a review petition was filed.

2. Search for a § 2802-specific extraterritoriality ruling after Ward in state or federal court. We did not find a published California appellate decision on this.

3. Confirm the Thai reporter citation and the pin cites for Gattuso, Tidewater, and § 2804.

4. Audit documents: offer letters, handbooks, equity plans, and arbitration agreements for California choice-of-law language or promises of California benefits.

5. Map where employees work: confirm actual work locations, flag any California workdays, and add location attestations and a notice requirement for relocation.

6. Survey other states' reimbursement laws (Illinois and the others listed above) for states where you have employees.

7. Policy design options:

   • (a) Reimburse only where legally required: California-based employees, California workdays, and states with their own mandates.
   • (b) A uniform national stipend for internet and phone, set high enough to count as a "reasonable percentage" under Cochran and Gattuso, with a way for employees to request more if their costs are higher.

   Option (b) has the lowest litigation risk and is simpler to run.

8. Tax: Have tax counsel confirm whether stipends should be set up as an IRS "accountable plan" (IRC § 62(c)) to avoid treating them as wages. This falls outside the scope of this memo.

Sources

• Cal. Lab. Code § 2802 (leginfo)
• Saberin v. Alation, Inc., A174549 (Cal. Ct. App. July 30, 2026) and PDF copy
• Ward v. United Airlines, Cal. Supreme Court opinion; Ninth Circuit follow-on
• Thai v. IBM (Justia); FindLaw
• Cochran v. Schwan's Home Service (FindLaw)
• O'Connor v. Uber (Casemine)
• Davis Wright Tremaine
• Mayer Brown
• National Law Review – Saberin
• Hunter Pyle Law
• Proskauer – Thai
• Advocate Magazine – Golden State Boundaries
• Ogletree – Labor Code § 925 FAQ