Hold the cellphone! Who pays if it’s work?

In an August 19, 2014, Daily Journal article, Hold the cellphone! Who pays if it’s work?, Michael Newman writes about a recent California appellate opinion providing employers insight into how they should reimburse employees for work calls make on private cell phone lines.  Newman notes, however, that while on the surface Cochran v. Schwan’s Home Service Inc. provides a definitive rule, in reality it provides little guidance as to how employers should comply with it.

Cochran focuses in on California Labor Code 2802 which requires employers to indemnify employees 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.”

The Second District Court of Appeal, interpreting this statute, held that “when employees must use their personal cell phones for work-related calls,” the law “requires an employer to reimburse them.”

The court went on to hold that even if the employee incurs no additional expense due to his or her work-related calls, the employer is still required to reimburse the employee. “Otherwise,” the court reasoned, “the employer would receive a windfall because it would be passing its operating expenses onto the employee.”

But if the employee has incurred no additional expense, what proportion of the phone bill must the employer cover? Here is where the seemingly bright line rule becomes very murky: “[T]he employer must pay some reasonable percentage of the employee’s cell phone bill.”

According to Newman, such a standard provides little help to the employers, and unfortunately there are few options guaranteed to eliminate the risk that an employer will inadvertently violate the law. He does have some suggestions:

• The most risk-averse option, but also the most extreme, is for employers to offer to pay the entirety of the phone bills of their employees who use personal cellphones for work, or else to supply cellphones to their employees. If the standard is “some reasonable percentage,” it would be hard to dispute that paying all of the bill will exceed this standard. However, most employers will likely shy away from this option.
• A more moderate response would be for employers to pay some large percentage of such bills. Again, the aim would be to clearly exceed “some reasonable percentage,” providing a comfortable cushion. Naturally, the smaller this percentage becomes, the greater the chance that some court or jury will find it not to be “reasonable.” But the advantage of such an approach would be to reduce the paperwork associated with reimbursement.
• Another possible option would be for the employee to submit periodic proof of the total amount of each phone bill, together with proof as to the proportion of time that was spent on work calls as opposed to non-work calls. The employer would then pay the proportion of the total bill matching this ratio. It should be noted, however, that under the reasoning of Cochran, it does not matter whether the employee actually paid the bill or not. The employer is likely on the hook for the “reasonable percentage” either way.

If you would like more information on the Cochran decision, or how you can implement a cellphone reimbursement policy for your company, please contact Michael Newman.