In Cochran v Schwan’s Home Service, Inc., a California court of appeal recently held that employers are on the hook for reimbursing employees who are required to use personal cell phones for work-related calls — even when such calls do not require any out-of-pocket expenditure by the employee, because they are included in the employee’s “unlimited minutes” cell phone plan.

Cochran is especially relevant for employers who authorize or permit employees to use personal cell phones and other devices for work. Under Cochran, where such use is, under the circumstances, required by the employer, the obligation to reimburse arises.

The Court of Appeal’s Decision

California Labor Code section 2802 requires an employer to reimburse its employees for expenses they necessarily incur in the discharge of their duties. The plaintiff in Cochran filed a class action on behalf of customer service managers employed by Schwan’s, seeking reimbursement under Labor Code section 2802 for expenses pertaining to the work-related use of their personal cell phones.

The plaintiff filed a motion in the trial court seeking certification of the case as a class action. The trial court denied the motion, noting that resolution of the class-wide claims would require individualized inquiries into each class members’ cell phone plans and payments in order to determine liability. The appellate court overturned this ruling, concluding that no such individualized inquiries were required in order to prove that the employer had violated its reimbursement obligations.

In reaching this conclusion, the court of appeal held that when employees are required to use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them “a reasonable percentage of their cell phone bills.” The court observed that this obligation exists, whether or not the employee has incurred any extra expense as a result of his or her work-related use of the phone. Thus, if an employee has purchased a cell phone plan with unlimited minutes for her personal use and does not pay any extra amount for work-related calls, the employer is still obliged to pay a percentage of the employee’s bill. “Otherwise,” the court explained, “the employer would receive a windfall because it would be passing its operating expenses onto the employee.”

The Cochran court furnished little guidance as to how the employer is to determine what constitutes a “reasonable percentage” of the employee’s cell phone bill in reimbursing the employee. The court noted that liability for reimbursement could readily be established by an employee simply showing that he or she 1) was required to use a personal cell phone to make work-related calls; and 2) was not reimbursed. The court left questions concerning the calculation of any unpaid reimbursements to the trial court, acknowledging that, “Damages, of course, raise issues that are more complicated.”

Implications

By requiring reimbursement even in the absence of identifiable charges for work-related calls, the court’s holding in Cochran may strike many observers as counter-intuitive. Under applicable court rules, the parties will have at least until September 23, 2014 to seek discretionary review of the court of appeal’s decision by the California Supreme Court. In the meantime, prudent California employers should take steps to assess their reimbursement practices, particularly those that have adopted a “bring your own device” or “BYOD” program. These programs authorize employees to use their personal cell phones, smart phones, and other devices to send and receive work-related calls and emails, and to perform other work for the employer. While the holding in Cochran addressed cell phone use, the court’s reasoning readily extends to the mandatory work-related use of other personal devices owned by the employee. Where such use is required, employers will need to assess whether their reimbursement practices are adequate, in light of the Cochran decision. Employers should also make sure they have clearly defined the circumstances under which the business-related use of personal devices is, in fact, required — and tighten them, as appropriate.

For more information about this decision, please contact any member of Schiff Hardin’s Labor and Employment Group.