Employee Cell Phone Reimbursements Advice

Protect your business revenue by making smart reimbursement decisions

Is your company paying its employees for cell phone use?

In today’s world our use of mobile devices such as cell phones has grown to outnumber our personal computers and land lines. Since the crippling recession of 2007 employers have been hard pressed to trim budgets in every way possible. One of the first “perks” to be cut were the Blackberry, iPhone and other smartphone devices employers had issued and required their employees to use for work activities away from the office. Employers concluded since most of their employees already had smartphones they could receive phone calls on their personal phones, as well as field the increasing number of E-mails and text messages. This practice called “bring your own device” (BYOD) has spread in popularity over the past several years. In essence, employers with BYOD policies and practices have been getting a free piggy back ride on the backs of their employees for several years. However, since August 22, 2014 this practice is now illegal in California.

Employers must reimburse employees for cell phone bills related to work use!

 A California court has ruled that employers must reimburse employees for a reasonable percentage of their cell phone bills related to work use. On August 12, 2014 the California Court of Appeals in Cochran v. Schwan’s Home Services, Inc. examined a situation where a national home frozen food delivery company required its California-based customer service managers and route managers to have personal cell phones to take and deliver customers’ orders. These jobs required the frequent use of cellphones to monitor E-mail and to make and receive telephone calls. The employer required these California employees to pay the entirety of their personal cellphone bills. Essentially, the employer was able to pass on to its employees the costs of purchasing cellphones, monthly fees, E-mail, internet, calling and texting charges. According to the California Court of Appeals 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 reimbursedin order to make a claim against their employer.

What are employers now facing for employee reimbursements?

The Cochran decision is based on section 2802 (a) of the California Labor Code which states “an employer shall indemnify (i.e. reimburse) his or her employee for all necessary expenditures or losses (i.e. expenses, fees, etc.) incurred by the employee in direct…discharge of his or her duties”. In addition, if an employee sues to enforce their Labor Code section 2802 cell phone reimbursement claim they may also recover interest and their attorneys’ fees.   If your company has been requiring its employees to use their cellphones without any reimbursement you need to:  

1.      Determine when the practice was first implemented.

2.      Contact each employee that incurred cell phone charges.

3.      Request each employee to submit reimbursement requests for a reasonable percentage of the monthly basic service charges and all work related call, text and E-mail charges.

4.      Total the reimbursement amounts incurred by each employee and pay ten percent (10%) annual interest.  

What should employers do going forward?

Going forward it is important for your company to examine and revise your employee expense reimbursement policy. Employers are now faced with developing a fair and reasonable cell phone reimbursement program. What is fair and reasonable will vary from company to company. Some options are:

  • provide a lump sum allowance for service charges based on average use or surveys of the cost of basic data plans;
  • provide, or reimburse for, both the phone and the cost of a data plan; or, 
  • pay for the device and service charges and to require employees to agree to detailed usage terms.  

Ultimately, an employer is free to craft the policy that works best for their company so long as it provides for full reimbursement of all employee cell phone expenses attributable to work use.

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