Labor & Employment Law Blog

On August 12, 2014, the California Court of Appeal issued a ruling that requires California employers to reimburse their employees a “reasonable percentage” of their cell phone bill when they are required to use their personal cell phones for work-related purposes.  (Cochran v. Schwan’s Home Service, Inc., Case No. BC449547.)

This decision arises out of a putative class action filed against Home Service on behalf of 1,500 customer service managers who were not reimbursed for expenses incurred for their work-related use of their personal cell phones.  Colin Cochran, the representative plaintiff, claimed that this practice violated Labor Code section 2802, which requires employers to reimburse their employees for necessary business expenses.

The trial court denied class certification because there was a question as to whether the cell phone expense was “incurred” by Cochran or his live-in girlfriend who allegedly paid his cell phone bill.  Additionally, since many employees purchase unlimited cell phone plans or do not otherwise incur an extra expense as a result of their work-related phone calls, the trial court determined that it was necessary to make an individualized inquiry into each class member’s cell phone plans and method of payment to determine liability under section 2802.  Accordingly, the trial court denied class certification because common questions did not predominate and a class action was not a superior method of litigating these claims.

The Court of Appeal reversed the order denying class certification because the trial court based its decision on incorrect legal assumptions.  The court clarified that employees are “incurring” an expense that must be reimbursed under section 2802 whenever they are required to use their personal cell phone to make work-related calls.  It does not matter if the cell phone bill is paid by the employee, a third party, or written off by the cell phone carrier.  In addition, employees do not need to show that they purchased a different cell phone plan because of their work-related phone calls to receive reimbursement under section 2802.  Consequently, the details of an employee’s cell phone plan do not factor into the liability analysis.  Instead, to establish liability under section 2802, employees merely need to show that they were required to use a personal cell phone to make work-related calls, and they were not reimbursed.

How does this decision impact employers?

Employers must reimburse employees a “reasonable percentage” of their cell phone bills when they are required to use their personal cell phone for work-related purposes.  Compliance with this rule will present a significant challenge for employers since the court offered no guidance as to how employers should calculate a “reasonable percentage” or under what circumstances work-related cell phone use will be treated as “required” by the employer.  Furthermore, even though Cochran only addressed cell phone use, this decision could apply more broadly to include other personal devices, such as personal laptops, home computers and iPads.

In light of this ruling, California employers should closely evaluate their business practices to determine if employees are required to use their personal cell phones, even on occasion, to carry out their job duties.  If employees are not required to use their personal cellphones, employers should clearly state that such use is not mandated by the employer in their personnel policies or employee handbooks.

However, if the company requires employees to use their personal cell phones for work-related purposes, the company should implement a policy to reimburse a reasonable percentage of such use.  Alternatively, to avoid any guesswork, employers may issue cell phones, laptops and other devices to their employees for business-purposes only, or have them available to borrow in the event that employees need to leave the worksite to conduct company business.