Employers and employees frequently inquire about whether an employer must reimburse an employee when the employee uses their personal cell phone for the employer’s business?
Yes. When employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them.
Longer Answer with Practice Recommendations:
An Employer Must Reimburse An Employee For The Employee’s Use Of A Personal Cell Phone For Work Related Duties.
In a 2014 case, an employee in California brought a lawsuit against his employer on behalf of customer service managers (essentially a class action on this issue!) who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones, alleging labor code violations and unfair business practices, and seeking declaratory relief and statutory penalties. The California Court of Appeal agreed there were violations and held (which means, it’s now the law):
“We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.” (Cochran v. Schwan's Home Services, Inc. (2014) 228 Cal. App. 4th 1137, 1140.)
Per the Cochran court, “The purpose of this statute is “ ‘to prevent employers from passing their operating expenses on to their employees.’“ (Id. at p. 1144.)
Labor Code section 2802, referenced by the court, governs this area [concerning reimbursement for all necessary employee expenditures or losses, not just cell phone use) and provides the backdrop for the court’s opinion:
(a) An 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, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.
(b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. Interest shall accrue from the date on which the employee incurred the necessary expenditure or loss.
(c) For purposes of this section, the term “necessary expenditures or losses” shall include all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.
(d) In addition to recovery of penalties under this section in a court action or proceedings pursuant to Section 98, the commissioner may issue a citation against an employer or other person acting on behalf of the employer who violates reimbursement obligations for an amount determined to be due to an employee under this section. The procedures for issuing, contesting, and enforcing judgments for citations or civil penalties issued by the commissioner shall be the same as those set forth in Section 1197.1. Amounts recovered pursuant to this section shall be paid to the affected employee.
The Cochran court determined that Labor Code section 2802 included an employer’s obligation to reimburse an employee whenever the employee uses his/her cell phone for work related duties. The consequences to the employer for violations are severe, including penalties, interest and attorney’s fees (subsections (b), (c) and (d).)
Moreover, the employee has a relatively easy burden to successfully make a liability claim against his/her employer on this issue. Per the Cochran court:
“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. It does not matter whether the phone bill is paid for by a third person, or at all. In other words, it is no concern to the employer that the employee may pass on the expense to a family member or friend, or to a carrier that has to then write off a loss. It is irrelevant whether the employee changed plans to accommodate work-related cell phone usage. Also, the details of the employee's cell phone plan do not factor into the liability analysis. Not only does our interpretation prevent employers from passing on operating expenses, it also prevents them from digging into the private lives of their employees to unearth how they handle their finances vis-à-vis family, friends and creditors. 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 he or she was not reimbursed. Damages, of course, raise issues that are more complicated.“ (Id. at pp. 1144-1145.)
In sum, employers must reimburse California employees (without distinction) for cell phone use when employees are required to use their personal cell phones for business purposes. Reimbursement is required even if the employee does not actually incur extra expenses as a result of his or her use. However, what is not well understood (or developed in the law) is how much must be reimbursed.
The Reimbursement Amount Is A Reasonable Percentage Of The Employee’s Phone Bill.
In the Cochran case mentioned above, the court of appeals held that employers must reimburse a “reasonable percentage” of their employees’ cell phone bills. However, the court did not provide guidance as to what is meant by “reasonable percentage.” Does it mean 20 percent? 75 percent? More? Unfortunately, in the years after Cochran was decided, employers still don’t have a good answer because the courts and government agencies have not provided specific guidance. Case law since Cochran has reinforced the rule that an employer must reimburse a “reasonable” amount without actually explaining how to calculate that amount.
The Cochran court did note that the employer can engage in some calculations:
“In calculating the reimbursement amount due under section 2802, the employer may consider not only the actual expenses that the employee incurred, but also whether each of those expenses was ‘necessary,’ which in turn depends on the reasonableness of the employee's choices.“ (Id. at p. 1144.)
While there is some discretion the employer can exercise in determining the amount of reimbursement (such as actual expenses and the reasonableness of the employee’s choice: i.e., was the employee “required” to use their own phone), the following language by the court shows the standard is still reasonable reimbursement (which means if the issue went to court a judge or jury would determine reasonableness, which means an employer should be careful in this area). Also, the court noted that even though some employees have plans which do not result in any additional cost for work use, the employer is still required to reimburse:
“The threshold question in this case is this: Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee. Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee's cell phone bill. Because of the differences in cell phone plans and work-related scenarios, the calculation of reimbursement must be left to the trial court and parties in each particular case.“ (Id. at p. 1144.)
A Recommendation On Policy.
So, what to do? Some say the safest approach is to pay the entire cost of an employee’s phone. Another approach is to purchase company cell phones for employees. We do not necessarily advocate those approaches.
We think a more palatable and reasonable approach is for the employer to pay a flat monthly stipend (e.g., $10 - $100 or some estimated percentage like 10-50%: the reimbursement number is a business decision based on history of usage). Put this policy in writing and expressly state that employees may submit expense reimbursement requests each month to the extent that the flat rate does not cover the total expenses for the usage that month. Distribute the policy to employees, and remember to inform new employees when they are hired.
When developing and implementing a policy, employees need to be treated equally in that they all need to be reimbursed for work related phone use. But work usage may vary depending on the position. Differences in reimbursement can be justified based on position (and amount of usage). E.g., One employee whose job depends on the phone, may be reimbursed 100%; in office staff, on the other hand, with less frequent use could get a stipend of $25 (or $50 or $100) or a lower percentage than others (e.g., 10%). Again, the key is that employees are reimbursed a “reasonable percentage” of their phone bill. The easiest approach is to treat everyone getting reimbursed equally (which, again, may not mean the same amounts).
Until more guidance is provided from the courts or a government agency, the employer should carefully monitor its practice and make sure it has a policy of “reasonable” reimbursement and fully address any employees grumbling about fair reimbursement. Even if they don’t “grumble,” all employees using their personal phones for work must be reimbursed (that should be the first biggest and clearest takeaway from this article; the second, and less clear takeaway, is the amount of reimbursement, but hopefully we have given you some tools to create a policy).
This entry does not give specific legal advice about your specific legal problem. No text or graphic contained in this entry is to be or should be used or relied upon as legal advice. This entry does not create an attorney-client relationship. If you want specific legal advice about your particular legal issues, or if you want to create an attorney-client relationship, you need to retain the Law Offices of Ron A. Stormoen by a signed written retainer agreement.