Employment Law Alert: Employers Must Reimburse Employees for Mandatory Cell Phone Use

In Cochran v. Schwan’s Home Service, Inc. (No. B247160, filed 8/12/2014), the California Court of Appeal, Second Appellate District, unequivocally held that under California Labor Code section 2802, an employer must always reimburse an employee for the reasonable expense of mandatory use of a personal cell phone. Section 2802 requires employers to indemnify employees 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 . . . .” The purpose of the statute is to prevent employers from passing their operating expenses on to their employees.

In Cochran, the plaintiff filed a putative class action 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. The trial court denied certification due to lack of commonality and because a class action was not a superior method of litigating claims. Specifically, the trial court noted that individualized questions about cell phone plans and payments were necessary to determine liability. For example, the trial court questioned whether an employee would suffer loss under section 2802 if the cell phone charges were paid for by a third person or if the employee did not purchase a specific cell phone plan because of usage at work.

On appeal, the Cochran court rejected these nuances as irrelevant to class certification: “If an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for purposes of section 2802.” The court reasoned that its interpretation would prevent employers from passing on their operating expenses and inquiring into the private lives of employees to discover how they handle their finances. Thus, the court concluded, 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 was not reimbursed. The reimbursement owed is a reasonable percentage of the phone bill.

Cochran illustrates the trend of California courts in broadly applying Labor Code section 2802. As with most employment-related violations in California, the penalties for failure to comply with section 2802 can be severe. Accordingly, with today’s increasingly harsh economic realities, employers must be aware of all costs the employee incurs in carrying out his or her employment duties, and reimburse for more than just the most common expenses, such as travel costs.

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August 13, 2014