Employers Must Reimburse Employees for Using Their Personal Cell Phones

Reimbursing employees for expenses has been the source of confusion for employers. One area, not generally considered, is reimbursing employees for the use of their personal cell phones for company business. Well, the bell has been rung.

Last week a California Court of Appeal held that a class action lawsuit against one employer was appropriate when the employer failed to reimburse employees for expenses associated with using their personal cell phones for work calls. At the trial court level, the employer successfully opposed the class action, arguing that liability could not be established on a class wide basis because it required individualized inquiry regarding whether an employee purchased a plan over and above what he normally would have had for purely personal use, and/or whether the employee incurred charges over and above his personal plan. The employer also argued that if someone other than the employee paid the employee’s cell phone bill, the employee would not have standing to pursue a claim for relief and this also created individualized issues. In addition to the individualized issues bearing on liability under Labor Code section 2802, the employer also successfully argued that damages would be highly individualized. The trial court denied the class action on the predominance of individualized issues.

The Court of Appeal reversed, holding that the trial court abused its discretion in denying the class action. The Court of Appeal held that the trial court relied on the wrong standard for liability for a reimbursement claim under Labor Code section 2802. According to the Court of Appeal, all that is required to prove liability under Labor Code section 2802 is that the employee necessarily incurred expenses in the course of his job duties. The employee does not need to prove that he incurred expenses over and above what he would have incurred absent the job, nor does he have to prove that he actually paid his cell phone bill. The court held that if the rule were otherwise, the employer would receive a windfall by being able to pass on some of its operating expenses to employees. Thus, the court held that to be in compliance with Labor Code section 2802, “the employer must pay some reasonable percentage of the employee’s cell phone bill” if the employee uses a personal cell phone for work purposes. In other words, “reimbursement is always required.” The court did not define what a “reasonable percentage” is, but instead held that “the calculation of reimbursement must be left to the parties and the court in each particular case.”

In short, the reality is employers need to reimburse employees if they are using their cell phones for business purposes. On the other hand, it may be a cheaper alternative than providing a company cell phone because employee lose their phones, abuse the use of the phones, and do not turn them in when they leave the company. Do the math.