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Employee Cell Phones: Who Pays? (Oct. 10, 2014)

So, now do California employers have to pay for their employees’ new iPhones and Androids? How about their minutes? Well, if an employer requires employees to make work-related calls on their personal cell phones, a panel of the California Court of Appeal recently said that the employer must pay “some reasonable percentage” of its employees’ cell phone bills. Cochran v. Schwan’s Home Serv., Inc., 228 Cal. App. 4th 1137, 1144 (2014).

In Cochran, the lead plaintiff brought a class action against a food delivery company, on behalf of 1,500 service employees who allegedly were not reimbursed for making work-related calls on their personal cell phones. Apparently, the employees were using their personal cell phones to coordinate food deliveries with clients. The plaintiff claimed that he and other employees were entitled to reimbursement under California Labor Code section 2802, which requires an employer to reimburse an 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 trial court said, in relevant part, that section 2802 did not require the company to reimburse employees who had unlimited minutes and would have had unlimited minutes even if their jobs did not require them to make work-related calls. Cochran, 228 Cal. App. 4th at 1142.

The Court of Appeal in Cochran disagreed. It said the purpose of section 2802 is “to prevent employers from passing their operating expenses on to their employees.” Id. at 1144 (internal quotation marks omitted). It therefore concluded that, under section 2802, reimbursement is “always” required for an employee’s “mandatory use” of personal cell phones to make work-related calls; otherwise, the court reasoned, “the employer would receive a windfall because it would be passing its operating expenses onto the employee.” Id. To avoid this windfall, the employer must pay “some reasonable percentage” of the employee’s cell phone bill. Id. What makes Cochran so alarming for employers is its holding that employers must provide the reimbursement—even when the employee has unlimited minutes and thus has not incurred any extra expense!

There are at least three important takeaways from Cochran.

First, the reasoning in Cochran rests on a questionable premise. Citing the California Supreme Court, Cochran asserted that the overriding purpose of section 2802 is to prevent employers from passing along costs to their employees. Although there may be some legislative history to support this assertion, the plain text of section 2802 suggests that its purpose is not to prevent employers from shifting costs to employees, but rather to ensure that employees are compensated for “all reasonable costs” that they incur “in direct consequence” of their jobs. If employees do not incur additional costs because of their jobs—that is, if they would have incurred the same costs absent their jobs—why should it matter whether or not an employer has saved costs? Indeed, nothing in the text of section 2802 precludes an employer from wisely minimizing costs where, as the case may be, it does not cost the employee anything at all. But this argument did not carry the day in Cochran.

Second, Cochran opens employers to greater liability exposure if they in fact require employees to make work-related calls on personal cell phones. The Cochran court said that, to show liability under section 2802, an employee “need only show” two things: (1) “he or she was required to use a personal cell phone to make work-related calls”; and (2) “he or she was not reimbursed.” Id. at 1145.

A third, related takeaway is that employers may perhaps reduce their liability exposure under section 2802 by making personal cell phone use voluntary rather than mandatory. Indeed, the Cochran court repeatedly noted that the company in that case “required” employees to use personal cell phones to make work-related calls, presumably as part of a “mandatory” policy. Id. at 1144–45.

But Cochran left open several important questions. Where, for example, should courts draw the line between what is recommended or voluntary, on the one hand, and what is required or mandatory, on the other? May an employer avoid liability if its policy does not explicitly require or mandate the use of personal cell phones to make work-related calls? Or is it enough that the circumstances of employment reasonably require employees to use their cell phones in this way? Courts will likely grapple with these questions in future cases.

In the meantime, expect some California employers to pay for at least some of their employees’ iPhones, Androids, and minutes.

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