For many employees, their cell phones are always close at hand, whether at work or in their personal life. But what if the employer requires employees to use their personal cell phones for work-related activities? Then we have a work/personal hybrid situation, and determining what part the employer should reimburse as a work expense becomes tricky. A California court of appeal recently waded into this issue, but not far enough.
In Cochran v Schwan’s Home Service Inc. (.pdf), the Second District Court of Appeal held
…when employees must use their personal cell phones for work-related calls, Labor Code section 28021 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.
Clear? Unfortunately, not really. We already knew that employers are required to indemnify their employees for “all necessary expenditures or losses incurred in direct consequence of the discharge of employment duties, or of their obedience to the directions of the employer….” Lab C §2802(a). Is the reimbursement obligation limited to situations in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? No, reimbursement is always required; the court is clear about that. Otherwise, the employer would receive a windfall, because it would be passing its operating expenses on to the employee. It doesn’t matter whether the employee’s cell phone bill is paid for by a third party (such as a family member) and it’s irrelevant whether the employee changed plans to accommodate work-related cell phone usage.
But what is the “reasonable percentage” of an employee’s cell phone bill that must be reimbursed? The court didn’t give employers a way to determine what a “reasonable percentage” might be. It says only that “the calculation of reimbursement must be left to the trial court and parties in each particular case.”
In his Recorder article, Stephen McKae offers a few things that employers might do as they await more specific direction from the courts. First, he suggests that employers “have and enforce a clear written policy as to who is expected to have a cell phone for business purposes, whether for phone calls or access to email, and who is not.” He notes the risks involved in the use of cell phones for business by non-exempt employees when it’s for work done outside the normal working day.
Second, to determine what will be accepted as a “reasonable percentage,” McKae suggests that employers consider surveying service plans and historical use to “set a dollar rate for what is necessary to provide essential service to meet the employer’s requirements” and then periodically review and adjust as needed.
As we wait for more guidance on this issue, you can get an overview of wage and hour law and regulations in CEB’s California Wage and Hour: Law and Litigation, chapter 1. For advice on handling employee compensation and benefits, turn to CEB’s Advising California Employers and Employees, chapter 2. And find a sample expense reimbursement policy in CEB’s Drafting Employment Documents for California Employers, chapter 3.
Other CEBblog™ posts you may find useful:
- Pay Me Back: Every Employer Should Have an Expense Reimbursement Policy
- Volunteers Cause Winery Woes
- You Don’t Own Me—Is it Employer or Employee Social Media Content?
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