California Labor Code Section 2802 requires that employers “indemnify his or her 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…” In English: an employer is required under California Law to reimburse employees for all out-of-pocket expenses incurred during the performance of their job (which includes more than just cell phones!). The purpose of this section is to prevent employers from passing their operating expenses onto their employees.
In Cochran v. Schwan’s Home Service, 228 Cal. App. 4th 1137 (2014), the Appellate Court took a closer look at how to apply Cal. Lab. Code §2802 and the applicability for an employer to be responsible for reimbursing their employee for expenses incurred for work such as a personal cell phone. The court concluded that the expenses incurred by the employee must be necessary in order to qualify for reimbursement by the employer. So before you submit a receipt or cell phone bill to your employer, ask yourself, was this necessary, or reasonable.
What is considered a reasonable or necessary expenses attributable to your employer will be reviewed on a case by case basis by the Courts—there is no definitive answer. However, if you require your employee to use his or her cell phone, an evaluation will favor reimbursement. So then what? How much are you supposed to reimburse and how does an employer quantify what part of an employee’s personal cell phone bill they are responsible for paying back? Do you have to pay the employee’s entire cell phone bill or only the additional expenses incurred due to using their personal cell phone for work purposes?
The Cochran court explained that any time a cell phone is used for work, the employer must reimburse the employee otherwise the employer receives a “windfall.” Today, with unlimited data plans, how does an employer ascertain how much they should reimburse their employee? This is the big question and one the Court did not provide guidance on for employers. What we do know is the Court stated that an employee should be paid some “reasonable percentage” of their cell phone plans when used for work purposes and reimbursement of some amount is required.
So now what? There are many options for employers in ensuring that proper reimbursement takes place to avoid liability under Labor Code 2802. To discuss these options or to understand what you should be reimbursing your clients for, contact our employment attorneys today.