More and more employers require employees to use their personal cell phones for work. Yet California Labor Code section 2802 requires employers to reimburse 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.” Over the past year, several cases have applied section 2802 to personal cell phones that employees are required to use at work-and required the employers to pay for the costs of those phones. This post explores some of those cases.
The seminal case on this issue is Cochran v. Schwan’s Home Service, Inc., 228 Cal. App. 4th 1137 (2014). In Cochran, the California court of appeal explained the interplay between section 2802 and cell phones:
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. Otherwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee. Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill.
Id. at 1144.
Cochran thus opened the door for employees who are required to use their cell phones for work to sue if their employers are not paying some percentage of their cell phone bill. While these claims may be relatively small for individuals, added together in a class action they can amount to millions of dollars.
As one can imagine, employers and their attorneys were unsettled by Cochran, and have argued that it should not be followed. However, the California Supreme Court had a chance to review and reject Cochran. Yet, on November 25, 2014, it denied both a petition for review and a request for depublication of that case.
Furthermore, two federal district courts in California have relied on Cochran without questioning its holding. In Richie v. Blue Shield of Cal., a Northern District court granted plaintiff’s motion for class certification based on Cochran:
The [Cochran] court held that the employer was required to ‘reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone,’ even when the employee did not incur an ‘extra expense’ as a result of that call (for example, when the employee had an ‘unlimited minutes’ plan).
No. C-13-2693 EMC, 2014 WL 6982943, at *17 (N.D. Cal. Dec. 9, 2014) (internal citations omitted).
Likewise, in Andresen v. Internat’l Paper Co., the court noted that “Cochran did not change the law of Section 2802.” No. 2:23-cv-02079-CAS(AJWx), 2014 WL 5419426, at *2 (C.D. Cal. Oct. 21, 2014). Rather, Cochran “merely confirmed that an employee may sue his employer for indemnification under Section 2802 in certain situations—namely, when an employer attempts to pass its operating expenses onto its employees. . . . [T]he Cochran court held that ‘when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them.’” Id. (internal citations omitted).
Cochran, Richie, and Andresen are consistent with Aguilar v. Zep Inc., No. 13-cv-00563-WHO, 2014 WL 4245988 (N.D. Cal. Aug. 27, 2014). Aguilar does not mention Cochran, but construes section 2802 in a similar manner. In Aguilar, the court concluded that the defendant was required to reimburse plaintiffs for their cell phone expenses. Id. at *21. The court reached that conclusion even though the plaintiffs admitted that they used their phones for both personal and business purposes, and that they would have had a cell phone plan regardless of their employment with defendant. Id. at *17.
Moreover, the reasoning of Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal. 4th 554 supports the analysis in Cochran. In Gattuso, the California Supreme Court noted that section 2802 was amended in 2000 “to prevent employers from passing their operating expenses on to their employees.” Id. at 562. The holding in Cochran is aimed at this exact problem. See Cochran, 228 Cal. App. 4th at 1144 (quoting this portion of Gattuso and stating that “[o]therwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee”).
Further, the Gattuso Court defined the “actual expenses” of using an employee’s personal automobile for business expenses to include “fuel maintenance, repairs, insurance, registration, and depreciation.” Id. This indicates that the Court intended to include as recoverable those expenditures that the employees would have incurred anyway. For example, an employee driving her own car is required by law to pay for insurance and registration for that car anyway. Yet Gattuso indicates that the employee can recover those costs from her employer under section 2802. Gattuso therefore supports Cochran’s holding that employees should be permitted to recover cell phone expenses that they would have incurred anyway.
As Stuart v. RadioShack Corp., 641 F. Supp. 2d 901, 904 (N.D. Cal. 2009) makes clear, once an employer knows or has reason to know that an employee has incurred an expense, “then it has the duty to exercise due diligence and take any and all reasonable steps to ensure that the employee is paid for the expense.” In other words, an employer “cannot stand idly by” and allow an employee to incur cell phone expenses, “even if the employee does not make a claim.” See Forrester v. Roth’s I.G.A. Foodliner, Inc., 646 F.2d 413, 414 (9th Cir. 1981).
An employer that requires its employees to use cell phones for work-related purposes knows or should know that the employees are using their cell phones for work-related purposes. Such employers should therefore reimburse its employees for some reasonable share of their cell phone bills.