Employee Cell Phone Reimbursement

Cochran v. Schwan's Home Service, Inc.: California's Leading Case on Cell Phone Reimbursement Under Labor Code Section 2802

California Labor Code § 2802 requires employers to indemnify employees for necessary expenditures incurred in the course of performing their job duties. One of the most frequently cited decisions interpreting that obligation is Cochran v. Schwan's Home Service, Inc. (2014) 228 Cal.App.4th 1137, a case addressing whether employers must reimburse employees who are required to use their personal cell phones for work-related purposes. The decision remains significant because it clarified that an employee need not incur an additional out-of-pocket expense before reimbursement obligations arise under Section 2802.

The Underlying Dispute

The plaintiff in Cochran filed a putative class action against Schwan's Home Service, Inc. on behalf of customer service managers who allegedly were required to use their personal cell phones for work-related calls but were not reimbursed for any portion of their cell phone expenses. The complaint asserted claims under Labor Code section 2802, California's Unfair Competition Law, and sought civil penalties under the Private Attorneys General Act (PAGA).

The plaintiff later moved for class certification. In opposing certification, the employer argued that liability could not be determined on a class-wide basis because individualized inquiries would be required for each employee. According to the employer, some employees maintained unlimited cell phone plans or plans paid by family members, some may not have incurred additional charges as a result of work-related calls, and others may have purchased their plans regardless of any workplace requirement.

The trial court agreed that these individualized issues predominated and denied class certification. The court reasoned that determining liability would require examining each employee's cell phone plan, billing structure, and actual expenses, creating an unmanageable inquiry across approximately 1,500 employees.

On appeal, however, the Court of Appeal determined it was not relevant whether employees suffered an extra expenditure for work-related cell phone usage. The Court of Appeal reasoned that failing to reimburse employees, regardless of whether they had unlimited cell phone plans for example, would provide employers with an unfair windfall.  The court ultimately concluded that employers shouldn’t be able to pass operating expenses to employees.  Accordingly, the Court of Appeal concluded that Labor Code section 2802 requires employers to reimburse employees who are required to use their personal cell phones for work related calls.  The reimbursement owed is a reasonable percentage of the employee’s cell phone bill.

Labor Code Section 2802

At the center of the dispute was Labor Code section 2802, which provides in relevant part: “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