Telecommuting Employees May Be Reimbursed for Phone and Internet Use During Covid-19
Since January 1, 2016, California employers must reimburse employees for use of their personal cell phones based on the decision in the landmark cell phone reimbursement class action case, Cochran v. Schwan’s Home Services, Inc. In addition, under Labor Code section 2802, employees must be reimbursed for “all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties,” for mandatory business purposes. Although this law has been on the books for four years now, it has particular relevance in the wake of the Covid-19 pandemic because many workers are now telecommuting due to mandatory business shutdowns ordered by state and local governments due to the Covid-19 pandemic.
What does this mean for employers?
According to Cochran, California employers must 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.” Unfortunately, even years after this case was decided, the exact measure of reimbursement is still somewhat unclear. While the court in Cochran determined that employers must consistently reimburse employees a “reasonable percentage,” it did not define what is “reasonable.” Furthermore, the employer must reimburse the employee even if the employee does not incur any additional expense on his or her cell phone/data plan as the result of using the device for work-related purposes (i.e. if the client has unlimited talk, text, and data plans, or the bill is paid by a third party).
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This law is reflected in California Labor Code section 2082:
“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, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.”
Plaintiffs bringing a claim for their employer’s failure to reimburse their expenses will also be entitled to recover attorney’s fees and costs for bringing an action against their employer.
Employers: be sure to show employee cell phone and expense reimbursement on employee wage statements/pay stubs.
Examples of Reimbursement Policies
The California law rules out implementing a simple flat rate, or a maximum amount of work-related cell phone expenses. That means employers must consider adopting new reimbursement policies to ensure that they remain compliant with California laws.
For example: An employee is a salesperson in the field and uses a cell phone for business-related purposes. The employer has several options to remain compliant with the reimbursement law:
Pay the employee’s entire cell phone bill;
Pay a “reasonable” portion of the cell phone bill as determined by the employee’s submitted phone bill and itemized call/data use;
Pay a flat rate that is a reasonable estimate of charges. In the event that charges exceed the flat rate, allow the employee to submit charges for reimbursement.
What if an employee has an unlimited amount of minutes, texting, and data in their cell phone plan?
Even if an employee has a personal cell phone plan with unlimited minutes, or otherwise did not incur any special or extra expense for work-related purposes, the employer is still liable for the business related phone charges. This is because the court’s reasoning focused on the benefit to the employer instead of the actual expense to the employee. The employer would otherwise be passing its operating expenses onto the employee, and receive a windfall.
The Cochran Court’s Analysis
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According to the Cochran court, “If an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for purposes of [California Labor Code] section 2802. It does not matter whether the phone bill is paid for by a third person, or at all. In other words, it is no concern to the employer that the employee may pass on the expense to a family member or friend, or to a carrier that has to then write off a loss. It is irrelevant whether the employee changed plans to accommodate worked-related cell phone usage.”
Also, the details of the employee’s cell phone plan do not factor into the liability analysis. Not only does the Cochran court’s interpretation prevent employers from passing on operating expenses, it also prevents them from digging into the private lives of their employees to unearth how they handle their finances vis-à-vis family, friends and creditors. To show liability under section 2802, an employee need only show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.
What Would a Potential Legal Claim Look Like?
An employee may make a claim for expenses that were not reimbursed through a demand letter, lawsuit, or labor claim. As an example, say that since the law was enacted on January 1, 2016, an employee used his cell phone on the job to answer emails, make phone calls, and check on status orders. He used his cell phone 75% of the time for work purposes. If his cell phone bill on average was $120.00-130.00 per month (average $125.00), at 75%, that would be $93.75 per month times the number of months that the employee was not reimbursed since the law went into effect or the employee began using his or her cell phone for business purposes (whichever is later). The employee would therefore entitled to the total reimbursement amount, plus interest and attorney’s fees, for failure to provide this reimbursement over that period of time.
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