IBM told its workers to keep doing their jobs during the pandemic, watched them pay for the equipment out of their own pockets, and then stood in a courtroom and argued it owed them nothing.

IBM Closed the Office. The Bill Went to the Workers.

On March 19, 2020, California Governor Gavin Newsom signed a statewide stay-at-home order. IBM responded by directing lead plaintiff Paul Thai and several thousand of his coworkers to continue performing their regular job duties from home. That sounds reasonable. The next part is not.

Thai and those thousands of coworkers personally paid for internet access, telephone service, telephone headsets, computers, and accessories. These were the exact same items IBM had provided inside its offices. IBM never reimbursed a single one of them, despite knowing the expenses were being incurred.

This was not a gray area. California Labor Code Section 2802, a law that has existed in essentially the same form since 1872, requires employers to pay back employees for every necessary expense tied to doing their job. IBM’s own legal team eventually admitted in court filings that IBM had provided all of these tools in the office before the pandemic. The moment the office closed, IBM quietly handed that operating cost to its workers.

Thousands of Workers, Zero Dollars Back

The original lawsuit was filed in December 2020 by Umair Javed, an IBM-placed worker employed through a staffing agency called Experis US, Inc. Paul Thai, a direct IBM employee, was added as an additional representative plaintiff in a later amendment. The case covered all IBM employees in California “who were subject to stay-at-home orders and/or whose offices where they were assigned to work were closed due to the COVID-19 pandemic.”

The case was brought under California’s Private Attorneys General Act (PAGA). PAGA is one of the few tools workers actually have with real teeth. It allows employees to step into the shoes of California’s Labor & Workforce Development Agency and sue on behalf of every other aggrieved worker. Penalties stack up for every employee, every pay period. This was not just a personal grievance. It was a class-wide reckoning IBM fought tooth and nail to avoid.

IBM demurred twice. A demurrer is a legal move that says: even if everything the plaintiff says is true, they still have no case. IBM used it to get the case thrown out at the trial court level, without ever having to face the underlying facts in open court. The trial court agreed with IBM both times, eventually dismissing the case entirely in March 2022 with no path to appeal.

IBM’s Defense Was a Shell Game

IBM’s core argument went like this: the expenses were caused by the government’s stay-at-home order, not by IBM. Therefore IBM was not the “direct cause” of the expenses. Therefore IBM owed nothing. On the surface, this sounds almost logical. Pull it apart and it falls apart immediately.

The statute does not say employers must reimburse expenses they personally caused. It says employers must reimburse expenses employees incur “in direct consequence of the discharge of their duties.” The question is whether the expense was tied to the work, not whether IBM personally triggered it. Thai was still doing IBM’s work. IBM still benefited from that work. IBM still knew its employees were paying for the tools to do that work. IBM simply chose not to pay.

The California Court of Appeal unanimously reversed the trial court in July 2023, sending the case back for further proceedings. The appellate court was direct: IBM’s causation argument inserts a tort-law concept of “proximate cause” into a statute that contains no such language and was never meant to work that way.

What This Actually Costs When You Are the One Paying It

The court documents reduce the harm to a legal framework: necessary expenditures, direct consequence of duties, reimbursement obligations. But every dollar IBM refused to pay was a dollar that came out of someone’s actual life. A worker getting on a call with a client, using their own phone, on their own internet connection, in their own home, generating revenue for a corporation that reported billions in annual earnings, while that corporation quietly decided their out-of-pocket costs were not IBM’s problem.

Think about what “internet access, telephone service, a telephone headset, and a computer and accessories” actually means in the middle of a global crisis. These workers were not running side hustles. They were doing the same job they had always done for IBM, just without IBM’s office, IBM’s network, IBM’s equipment, or IBM’s infrastructure. The physical cost of IBM’s business moved into their homes, and IBM left the invoice on the kitchen table.

The pandemic was already extracting an enormous toll on working people. Childcare collapsed. Grocery costs spiked. Medical bills piled up. Into that pressure-cooker moment, IBM added another layer: the cost of keeping IBM’s business operational now fell on workers who had no choice but to absorb it. Refusing to work was not an option. Refusing to pay for internet access meant losing the ability to do the job at all. IBM had all the leverage. Its employees had none.

California law has understood this power imbalance for well over a century. Section 2802 dates back to 1872, enshrined in the Civil Code before it moved to the Labor Code. The California Supreme Court has been clear: the entire purpose of this statute is to stop employers from passing their operating costs onto the people who work for them. IBM did not find a loophole. IBM used the pandemic as cover to do exactly what the law was written to prevent, and then spent years in court trying to make it stick.

The Quotes That Should Make You Furious

IBM provided its employees with office space and all the other tools that form the basis of [plaintiffs’] claims.

IBM’s own legal brief, submitted as part of its defense — confirming it knew exactly what its workers needed and had provided it until the moment it became inconvenient

Section 2802 is designed to prevent employers from passing their operating expenses on to their employees.

California Supreme Court, Gattuso v. Harte-Hanks Shoppers, Inc. (2007), quoting the legislative intent behind the statute IBM violated

IBM never reimbursed its employees for these expenses, despite knowing that its employees incurred them.

Third Amended Complaint, Thai et al. v. International Business Machines Corporation — the operative allegation the Court of Appeal accepted as true for purposes of the appeal

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.

California Court of Appeal, First Appellate District, Division Five — unanimously rejecting IBM’s causation defense

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.

California Court of Appeal — the conclusion that dismantled IBM’s entire legal theory

Why This Goes Way Beyond IBM

Economic Inequality: Who Gets to Send the Bill

IBM is one of the largest and most profitable technology corporations on earth. During the exact period this case covers, IBM continued to generate billions of dollars in revenue. Its executives continued to collect salaries, bonuses, and stock compensation packages that dwarf anything its average California worker earns in a career. The workers at the center of this lawsuit were not executives. They were people who needed a working internet connection and a phone headset to do their jobs. IBM’s refusal to cover those costs is a textbook example of how corporations redistribute economic risk downward.

California Labor Code Section 2802 exists specifically because this power imbalance is real and constant. As the California Supreme Court put it, the legislative intent was to ensure that “duty-related losses ultimately fall on the business enterprise, not on the individual employee.” When IBM refused to reimburse these expenses, it was not just breaking a law. It was asserting that its workers should absorb the operating costs of a multi-billion-dollar corporation because a public health emergency gave IBM a convenient excuse to transfer that burden.

The PAGA framework amplifies why this matters at scale. PAGA penalties apply per aggrieved employee, per pay period. The complaint covered every IBM California worker whose office was closed due to the pandemic. That is not a handful of people. IBM directed “several thousand” employees to work from home. Several thousand workers paying out of pocket, for months, for IBM’s operating costs, with zero reimbursement. The aggregate economic extraction from workers to corporation, during a pandemic, is the story here.

Public Health: The Pandemic Was Not a Free Pass

IBM’s entire legal strategy rested on using the public health emergency as a shield. Its argument was that the government stay-at-home order, not IBM’s directive, caused the expenses. Therefore IBM bore no responsibility. The Court of Appeal dismantled this cleanly: IBM still directed its employees to keep working. IBM still received the benefit of that work. The government order changed where the work happened. It did not change who was legally obligated to pay for the tools required to do it.

This matters far beyond IBM because dozens of corporations used the same logic during the pandemic. The Williams v. Amazon case, cited directly in this ruling, shows Amazon tried the identical argument. The federal district court rejected it in the same terms. Corporations across the country observed their employees absorbing operating costs, decided that was acceptable, and counted on the fact that most workers would never organize a PAGA action to fight back. The workers in this case did. The precedent they built protects every California worker whose employer tried the same maneuver.

IBM’s Savings, Your Expense

IBM’s refusal was not an accounting oversight. The company was fully aware its workers were absorbing these costs. It chose to keep that money. While IBM has not disclosed the aggregate dollar amount at stake in this PAGA action, the scale is straightforward: several thousand California workers, paying monthly for internet and phone and equipment, across the months of the pandemic lockdown period. Each dollar of that sum was a dollar IBM’s workers could not spend on rent, groceries, or debt. Each dollar stayed on IBM’s balance sheet instead of going back to the people who earned it.

IBM Is Still a Corporation. The Fight Is Still Happening.

The Court of Appeal reversed the lower court ruling and sent the case back for further proceedings. That means the litigation against IBM continues. IBM has not been ordered to pay anything yet. IBM’s legal team will keep fighting. The workers and their attorneys will have to keep pushing.

Watchlist: Bodies That Should Be Watching IBM

• California Labor & Workforce Development Agency (LWDA): The state agency on whose behalf this PAGA action was filed. They have direct institutional interest in IBM’s compliance with Section 2802.
• California Division of Labor Standards Enforcement (DLSE): The enforcement arm for wage and labor law violations in California. Section 2802 violations fall squarely within their mandate.
• U.S. Department of Labor (DOL): Federal oversight of employer wage practices; relevant given IBM’s national footprint and the likelihood of similar conduct in other states.
• National Labor Relations Board (NLRB): Worker organizing and collective action protections are directly relevant when thousands of workers face coordinated employer non-compliance.
• State Attorneys General in other jurisdictions: Every state with similar expense reimbursement statutes should be watching this case. IBM’s argument, if it had succeeded, would have been used nationally.

What You Can Actually Do