Employer’s Bell Rung By Ruling on Employee Cell Phone Charges

California Labor Code section 2802 requires employers to indemnify employees for all “necessary expenditures” incurred in carrying out their job duties. But does an employer have an obligation to reimburse an employee for cell phone expenses that the employee would have otherwise incurred absent the job? The California Court of Appeal says “yes.”

In Cochran v. Schwan’s Home Service, Inc., the Court of Appeal concluded that an employer must always reimburse an employee for the reasonable expense of the mandatory work-related use of their personal cell phone, even if the employee already has an unlimited plan and incurs no additional expense by using the phone for work-related purposes.

The Facts

The plaintiff, Colin Cochran, filed a class action alleging that his employer, Schwan’s Home Service, Inc., failed to reimburse customer service managers for expenses pertaining to the work-related use of their personal cell phones. Cochran sought damages for violation of Section 2802 and brought related claims asserting unfair business practices, seeking declaratory relief, and seeking penalties under the Private Attorneys General Act of 2004.

The trial court denied Cochran’s motion for class certification because he failed to demonstrate commonality and superiority. The trial court noted that individual inquiries predominated because class members would need to be individually examined as to (1) whether they had unlimited plans for which they did not actually incur any additional expense when they used their cell phone (2) whether cell phone charges were paid for by them or by a third party, and (3) whether they purchased a different cell phone plan because of their work-related cell phone usage. The need to make these inquiries for 1500 class members made any class action unmanageable.

The Appellate Court Decision

The Court of Appeal reversed the trial court’s denial of class certification, reasoning that the trial court had made erroneous legal assumptions about Section 2802. According to the Court of Appeal, the trial court mistakenly assumed that (1) an employee does not incur any expenses if the cell phone charges are paid by a third person or if the employee did not purchase a different cell phone plan because of work-related cell phone usage, and (2) liability could not be determined without examining the specifics of each class member’s cell phone plan.

The Court of Appeal determined that the details of a cell phone plan do not factor into the liability analysis. Rather, when any cell phone use is mandatory, an employer must always reimburse an employee for “some reasonable percentage” of the personal cell phone bill, irrespective of whether the bill is paid by a third party or whether the employee changed plans to accommodate work-related cell phone usage.

What Cochran Means For Employers

If Cochran correctly states the law, then employers who require employees to use their cell phones for work must reimburse them for a reasonable percentage of their cell phone bill. That is a rule far more easily stated than applied. The Court of Appeal declined to give specific guidance here, simply noting instead that questions of “[d]amages … raise issues that are more complicated.”