Employers May Be Obligated to Reimburse Employees for Their Use of Personal Cell Phones While Carrying Out Job Duties

This week the California Court of Appeal in Cochran v. Schwan’s Home Service, Inc. ruled that an employer must always reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone. Most California employers know that under section 2802 of the Labor Code, they are required to reimburse employees for necessary expenses incurred by the employees in carrying out their job duties.  The Court of Appeal concluded that "[i]f an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for the purposes of section 2802."

This holding could subject unsuspecting employers to liability when they require an employee to make telephone calls in carrying out their duties for the employer and the employee uses their personal cell phone because no other option is provided by the employer.  Under this interpretation of the law, employers who require employees to use a cell phone for work-related calls need to either provide the cell phone or reimburse employees for their use of the personal cell phone.  Employers who do not need employees to use their personal cell phones and want to avoid an obligation to reimburse employees for a portion of their cell phone charges should consider adopting a policy that prohibits the use of personal cell phones for work-related calls.

The employer in Cochran challenged the liability based on the fact that many cell phone plans have unlimited minutes or other arrangements where a third party family member or someone else pays for the phone used by the employee.  The Court of Appeal rejected this defense and said that "[t]he details of the employee’s cell phone plan do not factor into the liability analysis."  In addition, employers are not allowed to ask the employee how their cell phone plan works and the Court of Appeal held that employers are prevented "from digging into the private lives of employees to unearth how they handle their finances."  To show liability, the employee only needs to show that they were required to use a personal cell phone and they were not reimbursed.

Liability hinges on the question of whether the use of the personal cell phone is required.  Employers must consider whether their practices evidence a requirement that employees use a personal cell phone.  Even if there is no formal policy or mandate telling employees that they must use their personal phone, if employees cannot carry out their job duties without the use of their personal cell phone, the employer is subject to liability.

Increasing the potential exposure for the employer, the plaintiff in Cochran sought class certification of claims related to the employer’s requirement that more than 1,500 managerial employees use their personal cell phones on the job.  The Court of Appeal held that even though the employees had different cell phone usage, different cell phone plans, and therefore different damages, the case should proceed as a class action because the question of liability is the same.

The Cochran opinion provides sufficient motivation for employers to ensure that their policies and practices regarding reimbursement of business expenses, particularly the use of personal cell phones, protect them from exposure, particularly to the defense of costly class action litigation. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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