California Employer Cell Phone Reimbursement: Does your company have to reimburse you for the use of your private electronic devices?

California law requires employers to pay for certain expenses that their employees incur, including the use of personal cell phones. The statute that mandates this payment is Labor Code section 2802. Common work-related expenses covered by Section 2802’s requirements include money spent on cars, uniforms, and tools. 

Cell phones may also fall under the category of expenses that an employer must reimburse, depending on whether or not the employer requires employees to use their personal phones for work-related purposes. As discussed below, employers cannot avoid this kind of liability simply by having a reimbursement policy or practice that employees are not using.

Section 2802 Claims, Generally

The purpose of Section 2802 is to prevent employers from passing their operating expenses on to their employees. To that end, Section 2802(a) provides that, “(a) An employer shall 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…” 

Reimbursement for Cell Phone Expenses under California Law

Courts interpreting Section 2802 have developed a three-part test for determining whether an employer must reimburse employees for the use of their personal cell phones for work-related purposes. To meet this test, an employee must show: 

(1) The employer knew or had reason to know that the employee was using their personal cell phone for work-related purposes; 

(2) The employee made expenditures or incurred losses as a result of using their personal cell phone in direct consequence of their duties and in obedience to the directions of their employer; and 

(3) It was necessary under the circumstances for the employee to use their personal cell phones when discharging their duties. (See Castro v. ABM Industries, Inc. (N.D. Cal. 2018) 325 F.R.D. 332, 338, modified (N.D. Cal., May 14, 2018, No. 17-CV-3026-YGR) 2018 WL 2197527, citing Stuart v. RadioShack Corp. (N.D. Cal. 2009) 641 F.Supp.2d 901, 903 [when an employer “either knows or has reason to know that the employee has incurred a reimbursable expense . . . it must exercise due diligence to ensure that each employee is reimbursed”], Cassady v. Morgan, Lewis & Bockius LLP, (2006) 145 Cal.App.4th 220, 230, and Sinohui v. CEC Entertainment, Inc. (C.D. Cal., Mar. 16, 2016, No. EDCV142516JLSKKX) WL 3475321, at *11.)

Some courts have certified these claims as class actions, meaning that the employees could sue as a group and recover the money owed to all of their co-workers who also had to use their cell phones for work-related purposes. 

Common Issues in Cell Phone Reimbursement Cases

Our experience is that there are some common issues that arise in cell phone cases.

The first inquiry under Section 2802 is whether LinkedIn knew or had reason to know that Software Engineers were using their personal cell phones for work-related purposes. 

Employees can win on this inquiry by showing that their employer required them to use their personal cell phones for things like two-step authentication or punching in and out using their cell phones. In these types of cases, it is also common for the employees to show that the employer did not provide cell phones for the employees to use. That often makes it obvious that the employer knew that its employees were using their personal cell phones for work-related purposes.

In the Sinohui case, the court certified a class of employees who were required to download an app on their personal cell phones for work-related purposes. The court found that these circumstances presented common questions as to whether the employer knew or should have known of its employees’ cell phone use. The court noted that the answers to those questions would “resolve an issue … central to the validity of each one of the claims in one stroke.” (See Sinohui, 2016 WL 3475321, at *11.)

The second inquiry under Section 2802 presents the following questions: Did the employees incur losses within the meaning of Section 2802, and were employees who used their personal phones for work discharging their duties and/or obeying the directions of their employer? 

Under settled California law, the required use of personal cell phones for work is a “loss” for the purposes of Section 2802. (Cochran v. Schwan’s Home Service, Inc. (2014) 228 Cal.App.4th 1137, 1144.) As Cochran noted, “[i]t does not matter whether the phone bill is paid for by a third person, or at all.” (Ibid.)  

Several courts have relied on Cochran in similar circumstances. For example, in Richie v. Blue Shield of California, the court certified a class regarding a claim for failure to reimburse for cell phone expenses under Section 2802 based on Cochran. The court noted that Cochran’s holding applied “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).” (Richie v. Blue Shield of California (N.D. Cal., Dec. 9, 2014, No. C-13-2693 EMC) 2014 WL 6982943, at *17; see also Bowerman v. Field Asset Services, Inc. (9th Cir. 2023) 60 F.4th 459, 466, fn. 4.)

Furthermore, it is common in cell phone cases for employees to argue that they were discharging their duties and obeying the directions of their employer when using their personal cell phones for two-factor authentication. 

The third inquiry under Section 2802 asks whether it was necessary under the circumstances for the employees to use their personal cell phones when discharging their duties. Employees can prevail on this inquiry by showing that their employer’s policies required them to use their personal cell phones when discharging their duties.

“[W]hether it is ‘necessary’ for [employees] to use their personal cell phones when discharging [their] duties is a common contention that is very ‘capable of classwide resolution.’” (See Sinohui, 2016 WL 3475321, at *11.) However, the test is not whether the employees’ use of their personal cell phone was voluntary. (Amaya v. Menzies Aviation (USA), Inc. (C.D. Cal., Feb. 8, 2024, No. 2:22-CV-05915-HDV-MARX) 2024 WL 1178166, at *8.) Rather, “the Court must consider whether [personal cell phone use] was necessary to performing employees’ duties.” (Ibid.) This question should be examined “for each job classification, rather than for each individual class member.”(Ibid.)

What if Your Employer has a Reimbursement Process?

Some companies try to defend against cell phone claims by arguing that they have a process by which employers can get reimbursed for their business expenses. However, expense reimbursement policies do not necessarily relieve companies from liability for cell phone expenses under section 2802. (Stuart, 641 F. Supp. 2d at 904-905.)  That is because when an employer has reason to know that an employee has incurred an expense, it must ensure that that employee is reimbursed for that expense. (Id. at 904.) Merely having a reimbursement policy does not satisfy that obligation. 

In Stuart, the defendant argued that its reimbursement policy informing employees that they could be reimbursed for business expenses insulated it from liability under Section 2802. The court flatly rejected that argument. (Stuart, 641 F. Supp. 2d at 904-905; see also, Green v. Lawrence Serv. Co., 2013 WL 3907506, at *10 (C.D. Cal. Jul. 23, 2013) ([“[t]he analysis in Stuart is persuasive”]); Sinohui, 2016 WL 3475321, at *10 (C.D. Cal. Mar. 16, 2016) [noting that the employer did not “make an effort to ensure that [class members] submit expense reports for their cell phone bills”]; Uschold v. Carriage Services, Inc. (N.D. Cal., Mar. 6, 2020, No. 17-CV-04424-JSW) 2020 WL 1466172, at *8 [citing Stuart in holding that where an employer has reason to know that its employees have incurred an expense, it must exercise due diligence to ensure that the employees are repaid.)

The Stuart court’s reasoning for its holding is sound. Reimbursement for business expenses is “comparable to a wage.” (Stuart, 641 F. Supp. 2d at 904.) An employer who knows that an employee is working overtime “cannot stand idly by” and allow that employee to perform overtime work without proper compensation, “even if the employee does not make a claim for the overtime compensation.” (Id. at 903 (emphasis in original).) Furthermore, claims for reimbursement of business expenses cannot be waived. (Id. at 904, citing Labor Code § 219(a).)

Accordingly, to the extent that companies have reimbursement processes, those processes are likely not to satisfy their obligations under Section 2802. Instead, where a company knows that its employees are using their personal cell phones for business purposes, it is required to take affirmative steps to ensure that those employees are actually reimbursed for the cost of those cell phones.

The attorneys at Hunter Pyle Law have handled numerous cell phone cases in state and federal court, including the Castro case discussed above. We have recovered millions of dollars for our clients in those cases. If you have questions about whether your employer should be reimbursing you for using your cell phone (or other device) at work, please feel free to contact us at (510) 444-4400 or at inquire@hunterpylelaw.com to make use of our free and confidential intake process.