Whose Cell Is It Anyway? Appellate Court Rules California Employers Must Reimburse for Cell Phone Expenses

According to the Pew Research Center, as of January 2014, ninety percent of American adults have a cell phone, while fifty-eight percent of American adults have a smartphone. It is undeniable that mobile technology is fully engrained into our everyday lives. Our mobile handsets no longer simply function as communication tools; rather they are precious multi- and cross-functional devices connecting us to the world and to the community. Slowly, everything is being funneled into our smartphones: personal and professional communications, word and data processing, amateur photography and videography, numerous social media platforms for marketing and advertising, streaming film and television, educational tools and texts, lectures and podcasts, etc. As pervasive as they are, it is no wonder that lines begin to blur as it relates to the ownership of technology, especially in the workplace.

The “bring your own technology” or “bring your own device” (BYOD) trend is on the rise and with its benefits also comes its burdens. BYOD refers to the policy of permitting employees to bring personally-owned mobile devices to the workplace and to use them to access company information and communications. IT departments used to drive technology, but that has changed dramatically in recent years when consumers get the latest technologies first. Thus, employees end up bringing their personal devices into the workplace, and employers benefit from the latest features and capabilities of those devices while generally shifting costs to the employee.

However, a California appellate court recently found that employers who require employees to BYOD cannot shift the costs of doing so to their employees. In California, per Labor Code Section 2802, an employer must reimburse 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. The legislative history indicates the purpose of this statute is to prevent employers from passing their operating expenses on to their employees.

In Cochran v. Schwan’s Home Service, Inc., 2014 Cal. App. LEXIS 724, 10, 2014 WL 3965240 (Cal. App. 2d Dist. Aug. 12, 2014), the threshold question was whether an employer always has to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or has to provide reimbursement only when the employee incurs an extra expense which would not have occurred absent the job. The Court ruled explicitly that reimbursement is always required.

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. 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.

(Id. at 11-12.) Thus, employers must reimburse employees if they mandate that employees must use their personal cell phones for work-related calls. 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, with the actual reimbursement calculations based on the specifics at issue. While this decision applies to work-related calls, it would be prudent for employers to assume that this decision will also apply to data usage.

Employers who need or wish to exercise more control over the information and data on an employee’s “BYOD” device should consider paying for the device and/or service charges while requiring the employee to agree to a BYOD user agreement with detailed usage terms. This allows employers who may have sensitive security issues or who require the protection of confidential information to put constraints on the use of the device as well as clarify who owns what.

We regularly advise on best employment practices and related issues. Action items in light of the Cochran decision include (1) revisiting, and updating where necessary, any existing BYOD policies and procedures; and (2) making sure that expense reimbursement policies are reasonable as they relate to the mandatory use of devices for work.

If you would like to discuss these issues further, or have any questions about this blog, please contact us.