Why it matters: California employers can be required to reimburse employees for the cost of a cell phone plan – even if the plan in question did not result in extra expenses for the employee or a third party foots the bill, an appellate court in California has determined. A trial court agreed with the employer that the company was not required to reimburse an employee for a plan paid for by a third party that provided unlimited minutes, but the appellate court took a strict view of Section 2802 of the Labor Code, writing that “reimbursement is always required.” While the court was clear about liability, the calculation of damages will be complicated. Employers in the state should consider the potential ramifications of the decision and consider establishing a reimbursement policy or providing phones (or similar devices) for employees.

Detailed Discussion

As a customer service manager for Schwan’s Home Service, Inc., Colin Cochran claimed he used his personal cell phone for work-related calls and was entitled to reimbursement. He filed a putative class action on behalf of similar employees in California alleging violations of Labor Code Section 2802, among other causes of action.

Subdivision (a) of Section 2802 provides 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, or of his or her obedience to the directions of the employer[.]”

Cochran moved to certify a class of plaintiffs and a trial court denied the motion, finding that individual questions predominated because some employees would have unlimited data plans for which they did not incur an additional expense when using their phones.

On appeal, the court reversed. “Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job?” the panel asked. “The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee. Thus, to be in compliance with Section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill.”

Factors like whether a third party pays the cell phone bill and the details of the cell phone plan are irrelevant for the liability analysis, the court added. “Not only does our interpretation prevent employers from passing on operating expenses, it also prevents them from digging into the private lives of their employees to unearth how they handle their finances vis-à-vis family, friends and creditors,” the panel wrote. “To show liability under Section 2802, an 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.”

Damages, however, raise more complicated issues, the court noted. Because of the difference in cell phone plans and work-related scenarios, the court said the calculation of reimbursement must be left to the trial court and parties in each particular case.

On remand, the panel instructed the trial court to reconsider the motion for certification in light of its ruling and contemplate the use of statistical sampling evidence to establish damages.

To read the opinion in Cochran v. Schwan’s Home Service, Inc., click here.