IBM failed to properly cover work-from-home expenses incurred by employees during the COVID-19 pandemic, a state appellate court ruled, potentially creating a legal pathway for similar action against other companies.

The 3-0 ruling Tuesday by the California 1st District Court of Appeal overturns a lower court decision in a class-action lawsuit involving thousands of IBM employees.

“We always thought the trial judge got it wrong, and now the court of appeals has confirmed our belief that the stay-at-home orders do not insulate IBM from having to comply with the labor code,” Craig Ackermann, one of the plaintiffs’ attorneys, wrote in an email.

Attorneys representing IBM did not respond to a request for comment. IBM could challenge the ruling by petitioning the case to the California Supreme Court.

The lawsuit, filed by former IBM employee Paul Thai and others, came after Gov. Gavin Newsom’s stay-at-home public health order in March 2020, which shuttered most work sites. Thai used personal funds to complete his job while working from home, according to the lawsuit.

“To accomplish his duties, he required, among other things, internet access, telephone service, a telephone headset, and a computer and accessories,” judges wrote in their decision.

The complaint, originally filed in December 2020, cited a provision of state labor code that requires employers to reimburse workers for expenses “incurred by the employee in direct consequence of the discharge of his or her duties.”

The complaint, which was amended in 2021, went to trial in March 2022. The next month, a judge ruled in favor of IBM, which had argued that the government’s public health order was the sole reason for the company’s work-from-home requirements, so it should not be responsible for the expenses.

The appellate court disagreed, however.

“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,” judges wrote.

IBM is among dozens of companies that have been sued for work-from-home reimbursements, along with the likes of Oracle and Bank of America.