Court Holds: Reimburse Employees for Required Cell Phone Use

Under California law, employers must reimburse employees for certain job-related expenses.

In an unprecedented decision, a California court of appeal recently ruled that an employer must reimburse an employee if the employee is required to use a personal cell phone to make work-related calls; this is true even when the employee did not incur an extra expense by making the work calls because he/she had an unlimited data plan.

The court ruled that the employer must pay some reasonable percentage of the employee’s cell phone bill. Cochran v. Schwan’s Home Service, Inc., 2014 WL 3965240 B247160 (2014)

The case was brought by Colin Cochran on behalf of 1,500 customer service managers for Schwan’s, a food delivery company. The lawsuit alleged that the managers were not reimbursed for expenses when they had to use their personal cell phones for work. The trial court denied certification of the class on the grounds that some individuals in the class would not be entitled to reimbursement because they subscribed to unlimited data plans and did not actually incur an additional expense.

The trial court concluded that this would raise too many individual questions about cell phone plans to allow for a class action. But the court of appeal disagreed, reinstated the class action lawsuit and sent the case back to the trial court for further consideration.

This case could ultimately be appealed to the California Supreme Court. In the interim, employers may want to review their cell phone policies. CalChamber will keep you up-to-date on the status of this case.

Labor Code Requires Reimbursement

California Labor Code Section 2802 requires an employer to reimburse employees for all monies that they necessarily spend or lose directly related to performing their job duties or following the employer’s directions. For instance, employers have long known that they will need to reimburse such common expenses as work-related travel and dining expenses and mileage when an employee uses a personal car for work-related business.

In this case, the question was straightforward:

Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job?

The clear answer from the court: “reimbursement is always required.” To comply with the Labor Code, an employer must pay “some reasonable percentage of the employee’s cell phone bill.”

The court didn’t care whether the employee subscribed to an unlimited plan and didn’t incur extra expenses or didn’t have to increase his/her plan limit to cover the work related calls. The court also didn’t care if a third party, such as a family member, paid for the employee’s plan. Instead, to prove liability all the employee needs to show is that “he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.”

According to the court, the ruling prevents the employer from passing its operating expenses onto the employee and avoids an employer windfall.

Unfortunately, the appellate court did not provide guidance on how much an employer will have to pay when the employee subscribes to an unlimited data plan or when someone else pays for the employee’s plan – the court noted only that the reimbursement needs to be “some reasonable percentage.”

What constitutes a “reasonable percentage” is not a simple standard for employers to apply, and the uncertainty over how to apply this case is troubling given the number of class action lawsuits that tack on allegations of failure to reimburse for expenses.

The case is limited to situations where the employer requires an employee to use his/her personal cell phone for work-related calls. The case does not specifically address sporadic use by the employee because he/she wants to use a personal cell phone versus being required to use it.

Best Practices:

The case is a good reminder to employers regarding their expense-reimbursement obligations and to pay attention to all types of expenses, not just the more common expenses employers are used to seeing.

Employers may want to review any current cell phone usage practices and policies, especially if they have BYOD (Bring Your Own Device) policies.

  • Clarify up front whether you require employees to use their personal cell phones for work and, if so, establish your reimbursement policy.
  • If you don’t want employees using personal devices to conduct work, say that up front as well.
  • Set your policy regarding submission of expense claims and any documentation requirements (although a failure to promptly turn in an expense request won’t excuse an employer from responsibility to pay).
  • Don’t forget about off-the-clock work for nonexempt employees. Are they using personal devices to send work emails after hours or conduct other business? Although you can have a policy prohibiting off-the-clock work, you will still need to pay nonexempt employees if they work after hours. The issue may be a disciplinary issue for violating an off-the-clock policy, but payment for the work is still required.

Address other issues regarding use of personal devices, such as information security.

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