California Appeals Court Rules That Employers Must Reimburse Employees for Business Use of Personal Cell Phones

In a far-reaching decision applicable to many employers, a California Court of Appeal held in Cochran v. Schwan’s Home Services, Inc., 228 Cal. App. 4th 1137 (Aug. 12, 2014), that “when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them.”  Even where employees have cell phone plans with unlimited minutes, “the reimbursement owed is a reasonable percentage of their cell phone bills.”  Put another way, even where an employee already has a personal cell phone with unlimited minutes, and the work calls do not create an added expense for the employee, the employer must still reimburse the employee for a “reasonable percentage” of the bill.

To ensure compliance, we recommend that employers first review the extent to which employees’ personal cell phone use is “mandatory.”  Given the expectation of many employers that at least some significant portion of their employees be readily available outside the office, cell phone use would be considered “mandatory” for many employees.  This will, of course, depend on the employee’s position and duties.  To ensure compliance and avoid surprise claims for reimbursement, we recommend that employers establish appropriate written policies and practices to make clear to each employee whether or not they are expected to use their personal cell phones for business. Employers should also clarify for employees what actually constitutes business use of a personal cell phone that would qualify for reimbursement (e.g., performing job duties over the phone as required by the company would qualify as business use, whereas calling in sick generally would not).

The Cochran ruling did not provide any guidance on what qualifies as reasonable expense reimbursement for cell phone use, instead leaving it to the parties in “each particular case.”  The court did not foreclose the possibility of employers reimbursing such costs with a flat amount, to avoid the tedium of parsing each cell phone bill individually. Any such policy of reimbursing a fixed portion of an employee’s cell phone bill should include a mechanism to allow the employee to request a higher reimbursement amount where appropriate, i.e., based upon extraordinary business use of the personal cell phone in a particular month.

Because of the significance of this ruling, and the accompanying risk for lawsuits (including exposure to penalties, and class actions) arising out of such an issue, we recommend that employers review their reimbursement policies and practices with respect to personal cell phone use with counsel to ensure compliance.

Employers seeking further guidance on any of these issues may contact any of the firm’s lawyers listed below.

Raymond H. Hixson, Esq. (ray@hnemploymentlaw.com; 408-486-9977)

Brian K. Nagatani, Esq. (brian@hnemploymentlaw.com; 408-486-9988)

Mary Wang, Esq. (mary@hnemploymentlaw.com; 408-486-9933)

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