Cell Phone Expenses: Next Wave of Employee Class Action Lawsuit?


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A new breed of class action lawsuit involving employee use of personal cell phones for work is developing in California and may “go viral.”  California is often known as the birthplace of many new trends that eventually spread throughout the country.  Of course, many social media companies are based in California, and high-tech gadgets are developed in the state as well. With respect to employment law, creative employee-side attorneys often bring new theories and claims in California because of employee-friendly law and courts.  This is particularly true when more employees than ever are using personal devices for work-related purposes including phone calls, texts, and posting on social media for authorized worked purposes.

The Lawsuit

In August 2014, a California Court of Appeal issued a decision that should cause employers concern.  Specifically, in Cochran v. Schwan’s Home Services, Inc., the Court found that employers must reimburse employees for reasonable expenses related to employee use of personal devices for work-related purposes.  The Plaintiff, Colin Cochran, a customer service manager, used his personal cell phone for work-related purposes.  Cochran filed a employee class action lawsuit on behalf of a proposed class of at least 1,500 co-workers who did not receive reimbursement for personal cell phone expenses.  He bought claims under California Labor Code Section 2802, California Business and Professions Code Section 17200, and the California Private Attorneys General Act (Labor Code Section 2698 et seq.)  Pursuant to California Labor Code Section 2802, employers must reimburse employees for necessary expenses incurred while performing their job duties.

The Appellate Court’s Decision

The trial court rejected Cochran’s attempt to bring a class action, but the case was appealed.  The Court of Appeal reversed the lower court.  The Court wrote: “We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. 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.”  Essentially, the Court determined that an employer must always reimburse employees when they are required to use personal cell phones for work.  This is true, the Court found, regardless of whether the employee incurs no additional expenses for doing so.

The Court stressed that the law should avoid giving employers a “windfall” by passing operating expenses to their employees.  Unfortunately, the Court seemingly expanded the requirements of California Labor Code Section 2802, because the focus should be on whether the employee has incurred any additional expenses, not “employer windfall.”  Nonetheless, as a result of this new opinion, employers should take steps now to prevent becoming a victim of yet another new breed of class action claims.

What The Case Means For Employers

According to this over-reaching Court decision, even if an employee has a cell phone plan with “unlimited” minutes, or does not incur any additional expenses for work-related calls, the employer must provide a reasonable reimbursement to the employee.  Unfortunately, the Court did not determine or define what a “reasonable reimbursement” is, or how it might be calculated.

Employers who have a mandatory Bring Your Own Device (BYOD) workplace must now be sure to include a policy regarding the reasonable reimbursement of those employee expenses.  This new policy can be included in a written BYOD policy, and/or should be included in the company’s expense reimbursement policy.  Employers will need to “reasonably” calculate how much of the expenses should be paid.  Clearly, if an employee is charged an expense per each call, then the employer should reimburse those exact expense amounts.  Thus, employers should institute a process for employees to itemize their related expenses.  If an employee has an “unlimited” plan, the employer may need to determine the percentage of how many calls/texts/social media posts were work-related versus how many were not, and then determine the percentage of the cell phone bill/data plan to be reimbursed.

Employers who do not require employees to use personal cell phones/devices for work-related purposes may be able to argue that reimbursement is not required because the Cochran case focuses on “mandatory” use of personal cell phones.  Simply, if an employee voluntarily uses a personal cell phone to make a work-related call or send a work-related text, then the Court’s decision may not apply.

And of course, employers who prohibit employees from using personal cell phones/devices for work, should be safe from this new theory of liability.  And, if an employee violates this prohibition, the employer can follow its own disciplinary policies to enforce the prohibition.

Employers should also be concerned that other expenses employees incur will follow this same new reality, including for example, an employee’s in-home internet access, data plans, social media costs/expenses and the like.

What This Case Means For Employees

Employees should not be surprised if more and more employers choose to prohibit the use of personal devices for work-related purposes.  Such use was already fraught with issues including security/confidentiality concerns, wage and hour issues, and now expense reimbursement liability.  Thus, while the Cochran employees may have “won” the case at this stage, they and other employees may learn that their employer has decided to prohibit the convenience of the work-related use of personal devices.

Even if still required to use personal devices, employees should be ready for more administrative paperwork and expense reporting requirements.  Employees may also need to share total costs of such expenses so that a percentage reimbursement amount can be calculated.  Employees may also be told that they cannot exceed a certain amount of calls/texts/expenses, and going above that amount could lead to disciplinary action.  These changes, of course, may take away the flexibility employees currently enjoy with respect to how and when they post work-related social media updates, fine-tune their work-related YouTube videos, and initiate and receive work-related phone calls and texts.

What do you think?

Did the Court correctly expand the reach of California Labor Code Section 2802?  Does your company currently reimburse employees for mandatory use of personal devices and/or data plans for work-related purposes?  If not, how do you think your company will address this new court decision, if at all?

Information provided on this website is not legal advice, nor should you act on anything stated in this article without conferring with the Author or other legal counsel regarding your specific situation.  No attorney-client relationship is created via this website.

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