Posted on September 25, 2014
By: Laura C. Hess and Sachiyo Miller
On August 12, 2014, the California Court of Appeal issued a sweeping opinion in Cochran v. Schwan's Home Services, Inc. (2014) 228 Cal.App.4th 1137. The Court discussed the issue of whether an employer must reimburse an employee for the reasonable expense of mandatory use of a personal cell phone for work purposes, or whether the reimbursement obligation is limited to situations in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job. The answer is that partial reimbursement is always required.
In this case, an employee filed an action on behalf of customer service managers who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones. The trial court denied class certification due to the lack of commonality, and because a class action was not a superior method of litigating the claims. Thereafter, the California Court of Appeal held that employees must be reimbursed a reasonable portion of these bills for work-related use, and reversed the denial of class certification.
Labor Code § 2802 states that "[a]n 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...." The ruling noted that the purpose of this statute was to prevent employers from passing their operating expenses on to their employees.
The employer argued that many employees had unlimited plans and did not incur extra expenses due to work-related calls. In addition, the employer pointed out that many employees had phones paid for by third parties, such as family members. The Court rejected both of these arguments, reasoning that that the issue was whether the business should be required to reimburse the expense. The Court held that, to show liability under Labor Code § 2802, "[a]n employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed."
The answer was straightforward. To comply with Labor Code § 2802, employers must reimburse a reasonable percentage of the employee's cell phone bill if the employee has to use his or her phone for work purposes. The Court acknowledged that the issue of damages was more complicated. It therefore ordered the trial court to review how damages might be proven.
This ruling will affect the vast majority of employers. Most employers allow employees to use their own personal cell phones for work purposes. Some employers have Bring Your Own Device (BYOD) policies due to perceived productivity gains and cost savings.
In terms of other devices such as tablets, laptops, and home computers, etc., subsequent similar cases might be affected by this court's ruling. Although this ruling remains subject to further appeal, employers should review their cell phone policies to determine best practices related to expense reimbursements to avoid liability on this emerging issue.
Laura C. Hess is a Partner of Kring & Chung, LLP. She can be reached at (949) 261-7700 or email@example.com. Sachiyo Miller is a law clerk with Kring & Chung, LLP's Irvine office.