Employers Must Reimburse California Employees Required To Use Their Personal Cell Phones For Work Related Calls Even If The Employees Incur No Expense

Employers Must Reimburse California Employees
Required To Use Their Personal Cell Phones For
Work Related Calls Even If The Employees Incur No Expense

By Gayle M. Athanacio, Virginia K. Young and Sharon O. Rossi

In a recent published opinion, the California Court of Appeal in Cochran v. Schwan’s Home Service, Inc., held that that if an employee is required to make work-related calls on a personal cell phone, California Labor Code section 2802 requires the employer to reimburse the employee for a “reasonable percentage” of the employee’s cell phone bill, even if the employee incurs no additional expense or doesn’t personally pay the bill. As practically every employee has a cell phone and/or personal digital assistant (PDA), and many use them in their jobs, California employers would be well advised to review their policies to ensure compliance with this new case.

Under California Labor Code section 2802, employers are required to “indemnify” California employees for “all necessary expenditures or losses” employees incur “in direct consequence” of performing their duties. In Cochran v. Schwan’s Home Service, Inc., the plaintiff filed a putative class action against his employer, Schwan’s Home Service, Inc., and moved to certify a class of all employees who were allegedly not reimbursed for work-related use of their personal cell phones.

The trial court denied Cochran’s motion for class certification, concluding that Section 2802 required reimbursement only when employees established that they actually incurred an additional expense in using their personal phone for work. The trial court reasoned that if the employee had unlimited minutes or was covered under a family plan paid by another, the employee incurred no expense for which reimbursement was required. Because individualized inquiries regarding each class member’s cell phone plan and payments would be necessary to establish liability under Labor Code section 2802, the trial court ruled that adjudication on a class-wide basis was inappropriate.

Cochran appealed and the Court of Appeal reversed the trial court’s decision.  Contrary to the trial court, the appellate court held that the specifics of an employee’s cell phone plan and who paid the bill (i.e., whether the employee, a third person, or no one at all) were irrelevant to the issue of liability, i.e., whether the employer violated Section 2802. Rather, the appellate court held that where the employer required personal use of a cell phone, reimbursement was always required under Section 2802 and in order to be compliant, the employer must pay a “reasonable percentage” of the employee’s cell phone bill, even if the employee did not incur any extra expense using the phone for work purposes. To rule otherwise, the appellate court reasoned, would violate the purpose behind Section 2802 and afford an employer an improper “windfall” by passing its operating expenses onto the employee.

The appellate court acknowledged that calculation of the “reasonable percentage” of the employee’s plan that the employer must pay needs to be decided by the trial court on a case by case basis. However, this “reasonable percentage” determination presented a damages issue which by itself, did not warrant denial of class certification. Consequently, the appellate court reversed the denial of class certification and directed the trial court to reconsider Cochran’s class certification motion in light of the appellate court’s interpretation of Labor Code section 2802 and with directions to assess whether statistical sampling, as set forth by the California Supreme Court in Duran v. U.S. Bank National Association, could be used to establish damages on a class-wide basis.

So what does this mean for California employers?

The appellate court’s decision in Cochran appears inconsistent with Section 2802’s express language. Section 2802 provides that an employer “indemnify” employees “for all necessary expenditures incurred by the employee in direct consequence of the discharge of his or her duties.” Yet under the Cochran decision, employers are required to reimburse employees for cell phone usage even when the expense incurred was in no way a “direct consequence” of the employee’s work-related duties since the employee was going to incur the cell phone charge whether he used the phone for work or not. Although the rules of statutory construction require courts to look first to the express language of a statute, the Cochran court avoided the actual language of Labor Code section 2802, and instead focused on Section 2802’s “purpose.”

Nonetheless, in light of the Cochran decision, California employers should carefully review their policies, including policies relating to email, cellular phones, “bring your own device,” and working from home to assess whether those policies arguably mandate employees use their personal devices for work. If they do, employers should carefully evaluate their reimbursement policies to evaluate whether to revise their policies.

If you have any questions as to whether or how this ruling affects your business, please contact the Rogers Joseph O’Donnell attorney with whom you regularly work, or the authors of this legal update.

RJO’s Labor & Employment Law Practice Group is comprised of experienced labor and employment attorneys who regularly represent and advise employers, big and small, in wide variety of industries.

The content of this article is intended to provide a general guide to the subject matter, and is not a substitute for legal advice in specific circumstances.