Employers get out your checkbooks. The California Court of Appeal has ruled that employers must reimburse employees for the reasonable cost of using their personal cell phones to make or receive business calls.  

In a case involving  Schwan's Home Service, the Court ruled that the company must reimburse its service managers  for at least a portion of their cell phone bills if the company required them to use their personal cell phone to make or receive work-related calls.    

Background. The service managers filed suit seeking reimbursement of the portion of their cell phone bills for work-related calls. They service managers relied upon Labor Code Section 2802, which requires every employer in the state to reimburse employees for any  expenses the  employee necessarily incurs in the performance of his or her  job duties.  The company argued that no payments were owed because the employees had unlimited calling plans, and thus didn't actually incur any additional expense when using their phone for business.  The lower court agreed and denied the employees' motion to certify the case as a class action.

The Court of Appeal reversed the lower court ruling, thus opening the wage-hour litigation flood gates to yet another lucrative class action-type suit. In making its ruling, the Court noted that the very purpose of Section 2802 is to prevent an employer from passing the cost of operating its business onto its employees.  The Court went on to say that whether the employee actually incurred any additional charges for the work-related calls was irrelevant.  Rather, the only way to avoid a windfall to the employer is for the employer to reimburse the monthly plan cost representing the approximate percentage of business use.   The same holds true even if the employee's cell phone bill was paid by someone else, such as a friend or family member.

Notably, the Court did not decide precisely how much of the employee's cell phone bill actually must be reimbursed. The case was sent back to the lower court to take evidence on that point.

The rationale for the Court's decision is potentially far reaching, and is by no means limited to just cell phones.  The same analysis easily could apply to other business expenses incurred by employees that they arguably would have incurred anyway.  For example, if employees are required to have internet at home to access or receive company email, the rationale of this case would require that the employer also pay at least a reasonable portion of the employee's home or smartphone internet plan as well.   The same could be true, for example, where employees are expected to use their personal laptop either at work or on weekends or after hours. If the laptop is a required piece of equipment, the employer could be on the hook for at least a portion of its cost as well.   

Employer Action Items.  The very first thing to do is a comprehensive audit of all expense reimbursement policies that may run afoul of this ruling and then assess the financial impact of strict compliance.  Once this audit is completed, the company will have to decide whether to change any offending policies or wait to see if Schwan's lodges an appeal of the ruling to the California Supreme Court.  A related decision is whether to reimburse employees (and potentially former employees as well) for these costs or simply modify the policies on a going forward basis. Each strategy carries risks, and employers should consult with expert labor counsel as to the best course of action.  

Please call your contact at the Firm if you have any questions about how this important ruling affects your business. We are reachable at 818-508-3700 or at www.brgslaw.com.

Richard Rosenberg & Jeffrey Fuchsman

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