Colin Cochran (plaintiff) filed a putative class action against Schwan's Home Service, Inc. (Home Service) on behalf of customer service managers who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones. He alleged causes of action for violation of section 2802; unfair business practices under Business and Professions Code section 17200 et seq.; declaratory relief; and statutory penalties under section 2699, the Private Attorneys-General Act of 2004. He moved to certify the class. Home Service filed an opposition as well as a motion to deny certification. On October 24, 2012, the trial court held a hearing.

The trial court denied class certification on the grounds that “many people now have unlimited data plans for which they do not actually incur an additional expense when they use their cell phone,” and therefore concluded that individual questions of liability would predominate, rendering class certification improper. The trial court stated: “[Cochran] has not demonstrated how the cell phone plans and method of payment exhibited by a portion of the class will accurately reflect the plans and method of payment for the entire class.

California Labor Code Section 2802

Pursuant to section 2802, subdivision (a), “[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[.]” The purpose of this statute is “‘to prevent employers from passing their operating expenses on to their employees.'” (Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554, 562 (Gattuso) [quoting legislative history from the 2000 amendment to the statute].) “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. [Citation.]” (Gattuso, supra, 42 Cal.4th at p. 568.)

Appellate Court's Conclusion

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 onto the employee. Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee's cell phone bill.

Bottom Line

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 worked-related cell phone usage. Also, the details of the employee's cell phone plan do not factor into the liability analysis. On August 12, 2014, the Court of Appeals stated, “Because the trial court made erroneous legal assumptions, the denial of class certification must be reversed.”

Not only does the Court's 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-a-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.

Are You Currently Using Your Personal Cell Phone To Conduct Work-Related Tasks?

California employers should be reimbursing employees who use their personal cell phones and internet service for work-related tasks. If you are currently using your personal cell phone for work and have questions about employee reimbursement or your employer's reimbursement policy, please feel free to contact leading California employment lawyers at Kingsley & Kingsley.

To discuss your situation call us at (818) 990-8300 or clicking here to contact us regarding your case.