By Jennifer L. Lippi, J.D.

In a sweeping decision, the Court of Appeal in Cochran v. Schwan’s Home Service, Inc., held that when employees have to use their personal cell phone for work-related purposes, the employer must reimburse them for such use, whether the employee incurred an additional expense as a result of such use or not. 

Colin Cochran worked as a customer service representative for Schwan’s. As part of his job, he used his personal cell phone to make business calls.  The company did not reimburse him for the use of his phone.  Cochran filed a class action against Schwan’s on behalf of 1,500 customer service managers who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones.

Cochran argued that he had a right to reimbursement under California Labor Code section 2802. Labor Code section 2802(a) requires employers to reimburse employees for business related expenses.  Specifically, it provides: “an 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 argued that he was entitled to reimbursement even though he had an unlimited data plan and did not incur any additional out-of-pocket expenses related to the business calls. The Court of Appeal agreed. It held that in order to be in compliance with Labor Code section 2802(a), if an employee is required to use his or her personal cell phone for work-related business, then the employer is required to reimburse the employee a “reasonable percentage” of the employee’s personal cell phone bill.  This duty to reimburse exists even if the employee has an unlimited data plan and, therefore, incurs no additional costs due to the work-related calls.  The court also noted that it is irrelevant if an employee has an arrangement with a family member or third party to pay the employee’s cell phone bill.  The court, rather than focusing on the employee’s out-of-pocket expenses, focused on the fact that the employer would be receiving a windfall as it was passing on operating expenses to the employee. 

What constitutes a “reasonable percentage?” Unfortunately, the court did not give any guidance on this, but instead concluded that what constitutes a reasonable percentage will depend on the facts and circumstances of each particular case.  The court also did not address what is considered “mandatory” use of personal cell phones for business use.  The definition of “mandatory” may be pliable, and used to cover situations where an employee is expected to make business calls at times and places where a company-issued phone is not available, such as while traveling. 

The bottom line: to comply with Labor Code section 2802(a), employers who require employees to use their personal cell phones for work-related calls should implement an appropriate reimbursement policy. As an alternative, employers can issue company phones, while at the same time prohibiting use of personal phones for business purposes.

 

 

The full text of the Schwan’s case can be found at https://www.courts.ca.gov/opinions/documents/B247160.PDF

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