California Supreme Court Denies Review of Cell Phone Reimbursement Case

The California Supreme Court has denied a petition to review Cochran v. Schwan’s Home Service, Inc., Court of Appeal of California, Second Appellate District, Division Two, No. B247160 (August 12, 2014). As a result of the court’s decision, an appellate court ruling that found that employers must reimburse employees for the business use of personal cell phones in some circumstances will stand. Employers should consider taking measures accordingly to minimize the risk of class action litigation.

Earlier this year, the Second Appellate District reversed a trial court’s denial of class certification in a case involving 1,500 customer service managers who alleged that they were not reimbursed for expenses pertaining to the work-related use of their personal cell phones.

The employees alleged that they were required to use their personal cell phones at work. The named plaintiff, and presumably other potential class members, subscribed to an unlimited minutes plan and did not incur any additional out-of-pocket expenses when using their phones at work.

The appellate court had held in part that employers must always reimburse employees for the “mandatory” use of personal cell phones pursuant to Labor Code section 2802. Generally, that code section requires employers to reimburse employees for necessary business expenditures. The court wrote:

The threshold question in this case is this: Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? The answer is that reimbursement is always required.

The Court of Appeal reasoned that were it to rule otherwise, “the employer would receive a windfall because it would be passing its operating expenses onto the employee.”

The California Supreme Court denied a petition for review on November 25, 2014. It also denied a request to unpublish the appellate court case.

The California Supreme Court denies petitions for review for a number of reasons, and its decision in this case is not necessarily an endorsement of the lower appellate court’s ruling. It is apparent, however, that the court will not address the legal issues raised in Cochran in the foreseeable future.

In the meantime, employers can continue to assert a number of defenses to Labor Code section 2802 class action claims. It is expected, however, that the plaintiff’s bar will be filing many more class actions alleging a failure to reimburse a reasonable percentage of cell phone expenses where a personal cell phone was required on the job.

In order to minimize the risk of class action claims, California employers should promptly review their reimbursement policies and consult with an employment law attorney regarding compliance alternatives. Among several alternatives, some employers have considered prohibiting or limiting the use of personal cell phones, issuing corporate phones to employees, or devising a reimbursement policy.