Are You Properly Reimbursing Your Employees?

by Ervin Cohen & Jessup LLP
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EmpBlog-8.28.2014-Man Walking w Cell Phone-iStock-PAID-RESIZEDWhen an employee drives to a client’s office to close the sale, employers know they must reimburse the employee for that mileage.

When an employee flies to a work-related convention to work a booth, employers know they must reimburse the employee for those travel expenses.

When an employee takes a potential customer out for dinner, employers know they must reimburse the employee for that meal.

Most employers, however, don’t know where those requirements to reimburse employees come from. They come from the California Labor Code, Section 2802, which states that: “[a]n 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[.]”

This relatively brief legal requirement has been the subject of many lawsuits over the failure to reimburse employees for work-related expenses. Most recently, the California Court of Appeal decided in Cochran v. Schwan’s Home Service, Inc. that employers must now reimburse employees for work-related cell phone calls and data usage.

Specifically, the Cochran court ruled that “the employer must pay some reasonable percentage of the employee’s cell phone bill” even for those employees who had unlimited plans and did not incur extra expenses due to work-related calls and even for those employees who had their phones and phone bills paid for by someone else. To be entitled to reimbursement, an employee only needs to show “that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.”

Unfortunately, the case has created more questions than answers. What amount should an employer reimburse the employee for such cell phone use? Should an employer reimburse the employee for the use of a home land-line that may have been used for work occasionally? What about the pens and pencils and calculator on the employee’s desk?

We probably won’t know the answers to those questions until someone else gets sued. However, if you’re an employer and you’re not carefully reviewing what expenses employees incur as a result of working for you, then you should consider implementing a generous reimbursement policy. Or roll the dice and hope you’re not the next test case.

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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