Calling All California Employers: You Must Reimburse Employees for Mandatory Use of Their Personal Cell Phones Even if They Have Unlimited Minutes

A California appellate court recently held that employers are always required to reimburse employees for mandatory use of their personal cell phones, even if they do not incur any additional expense for doing so.  The case is Cochran v. Schwan’s Home Services Inc., Court of Appeal of the State of California, Second Appellate District, Divisions Two, Case No. B247160 (August 12, 2014).  A copy of the opinion can be found here.

Plaintiff Cochran, a customer service manager for a food delivery provider, filed a class action lawsuit on behalf of a proposed class of 1,500 customer service managers who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones.  He asserted claims under California Labor Code §2802, California Business and Professions Code §17200, and the California Private Attorneys General Act (Labor Code §2698 et seq.).

The trial court denied class certification.  While it found that the other elements of class certification were satisfied, it concluded that class certification was inappropriate because individualized issues predominated over common issues.  Specifically, it concluded that individualized determinations were required to determine whether class members actually incurred any expenses because some employees had unlimited minute plans, were a part of family plans, or did not pay their own cell phone bills.  Further, the court would have to determine whether an employee purchased a more expensive cell phone plan to cover the cost of work related calls.

The appellate court reversed, holding that the trial court relied on erroneous legal assumptions.  The court of appeal stated that an employer is always required to reimburse employees for the mandatory use of personal cell phones, even if the employee incurs no additional expense for doing so.  Otherwise, the court believed, the employer would receive a windfall by passing its operating expenses onto the employee.  This reasoning seems questionable, since the purpose of Section 2802 is to reimburse employees for their required, work-related out-of-pocket costs; if an employee did not actually incur any additional out-of-pocket costs, there is nothing to reimburse.  Whether the employer gains some advantage (or “windfall” as the court characterized it) is not the relevant question under Section 2802.  Nevertheless, the court of appeal held that to comply with California Labor Code §2802, the employer must pay some reasonable percentage of the employee’s cell phone bill, although what is considered reasonable will vary from case to case.

While the court did not provide any guidance on what a reasonable reimbursement might be, presumably (although tediously) it would be reasonable to calculate the percentage of use devoted to business vs. personal use and pay the business percentage of the monthly bill.  In the alternative, employers can require employees to use only company-issued devices so that employers do not have to deal with this issue.

Following this decision, employers should review their business expense reimbursement policies to ensure they compensate employees for mandatory use of personal cell phones.  The court’s use of the term “mandatory” is important because there may be situations in which an employee chooses to use a personal device but is not required to do so by the employer.  Employers can argue that reimbursement is not required for optional use of personal devices.