By Remy Kessler and Ian A. Wright
On August 12, 2014, the California court of appeal issued a sweeping decision that may spark a new wave of class action lawsuits against California employers. In Cochran v. Schwan’s Home Service, Inc., the appellate court determined that employers must reimburse employees for work-related phone calls made on personal cell phones or face liability—potentially on a class-wide basis. Under California Labor Code section 2802, employers must reimburse employees for necessary expenditures incurred in performing their duties. Now, at least a portion of an employee’s personal cell phone bill may constitute an expenditure covered by section 2802.
The plaintiff in Cochran filed a putative class action on behalf of 1,500 customer service managers who were not reimbursed for expenses incurred as a result of work-related use of their personal cell phones. The trial court denied certification of the class finding that individualized questions of fact regarding employee cell phone plans and payments would be necessary to determine liability and, therefore, it believed that "a class action was not a superior method of litigating the claims."
In reversing the order denying class certification, the court of appeal disagreed with the various assumptions made by the trial court, namely that: (1) employees are not entitled to reimbursement if a third person pays their cell phone bills; (2) employees are not entitled to reimbursement if they did not purchase a separate cell phone plan because of their need to use a cell phone at work; and (3) liability for failure to reimburse cannot be determined without an inquiry into the specifics of each employee’s cell phone plan. The court of appeal stated: "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 work-related cell phone usage." The court noted that its holding prevents employers from passing on operating expenses to their employees (even to those employees who do not actually incur added charges even when they use their personal cell phones at work) and "digging into the private lives of their employees to unearth how they handle their finances vis-à-vis family, friends and creditors."
Thus, under Cochran, employers now face liability for failure to reimburse employees for a "reasonable percentage" of their personal cell phone bills if they need to use them for work. Employers also now face the prospect of uphill battles defeating class certification since, as the Cochran court observed, liability for failure to reimburse for cell phone usage may be "determined without an inquiry into the specifics of each class members’ cell phone plan." Therefore, if an employer does not have a policy or practice of reimbursing employees for cell phone use, it will be relatively simple for a court to certify a class based on that common fact alone, which would be applicable to the entire workforce.
What Should Employers Do Now?
To the extent employers require employees to use a cell phone for work, employers should consider providing their employees with cell phones and voice/texting plans. In the alternative, employers should implement written policies requiring their employees to track and submit expense reports regarding their work-related cell phone usage so that employees can be reimbursed for the actual cost of such usage. If the actual cost cannot be determined, such as if an employee already has an unlimited minutes/texting personal plan, then the employer will be required to reimburse the employee for a "reasonable percentage" of the personal cell phone bill. The court did not provide any guidance as to what a "reasonable percentage" means. Finally of course, employers can avoid the problem altogether and make clear that cell phones are not needed and should not be used for work.
