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 to calculate 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.