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Hold the Phone! Reimbursing Employees for Cell Phone Use in California

It is well known that employers must reimburse California employees for cell phone use when employees are required to use their personal cell phones for business purposes. Reimbursement is required even if the employee does not actually incur extra expenses as a result of his or her use. However, what is not well understood is how much must be reimbursed.

In Cochran v. Schwan’s Home Services, Inc., 228 Cal. App. 4th 1137 (2014), the California court of appeals held that employers must reimburse a “reasonable percentage” of their employees’ cell phone bills. However, the Court did not provide guidance as to what is meant by “reasonable percentage.” Does it mean 10 percent? 50 percent? More? Unfortunately, four years later, employers still don’t have a good answer. Case law since Cochran has repeatedly reinforced the takeaway that an employer must reimburse a “reasonable” amount without actually explaining how tocalculate that amount.

Plaintiffs are bringing more putative class actions each year that include cell phone reimbursement claims, and courts have been certifying them. In just the last few weeks, a California federal judge certified a class action involving tens of thousands of janitors who were not reimbursed for cell phone expenses.

So what’s an employer to do? The safest approach is to pay the entire cost. That said, a more palatable approach is to pay a flat monthly stipend (e.g., $50). Put this policy in writing and expressly state that employees may submit expense reimbursement requests each month to the extent that the flat rate does not cover the total expenses for the usage that month. Distribute the policy to employees, and remember to inform new employees as they onboard. Until more guidance is provided, employers should continue to carefully monitor this area of law and their company’s practice.

©2018 Drinker Biddle & Reath LLP. All Rights Reserved

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About this Author

Laurie Holmes, Employment lawyer, Drinker Biddle
Partner

Laurie A. Holmes advises clients in the areas of employment litigation and counseling, or as she likes to call it, “soap opera law.” She prides herself on giving down-to-earth and legally sound advice, delivered with compassion and a dose of humor where appropriate. She believes her practice area requires this.

312-569-1335
Jaime Walter, Litigation Lawyer, Drinker Biddle
Senior Attorney

Jaime D. Walter has litigated cases at the trial and appellate levels and in state and federal courts across the nation. Jaime has represented defendants in single-plaintiff actions, class and collective actions, and coordinated proceedings, and she has extensive experience managing all aspects of pre-trial and trial work-up.

Jaime’s practice includes representing employers facing wage-and-hour, harassment, discrimination, retaliation, wrongful termination, fraud, defamation, unfair competition, and PAGA (Private Attorneys’ General Act) claims, among others. She also counsels employers and audits their employment policies proactively to minimize the risk of litigation.

415-591-7631