While many companies have embraced BYOD (Bring Your Own Device) policies in their workplace, a new California appellate court decision, Cochran v. Schwan’s Home Service, Inc. (August 12, 2014) has changed the playing field. This important decision ruled that California employers must reimburse employees for their cell phone use for business purposes.  The intent of the decision is to make sure that the employer cannot receive a “windfall” by “passing its operating expenses on to the employee.”

The plaintiff worked as a customer service manager and sued his employer, Schwan’s Home Service, Inc., to recover the work-related expenses of his personal cell phone not only for himself but for the 1,500 other customer-service employee managers like him.  He had a cell phone plan with unlimited minutes and did not incur additional out-of-pocket expenses relating to the business calls. In fact, the plaintiff did not personally pay for the cell phone use because he was on the phone plan of his significant other.

While the case did not receive class action certification from the court, the ruling for employee reimbursement of cell phone expenses was based upon California Labor Section 2802. The relevant part of the statute states:

“An employer shall indemnify his or her employee for all the 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, believes them to be unlawful.”

Employers may not ask their employees to sign a waiver concerning cell phone use under California Labor Code Section 2804. The statute expressly prohibits waivers on an employee’s rights to reimbursement. The penalties for violation of this code section can be very expensive; a court case – especially a losing one — could also bring unfavorable publicity. All awards made by the courts and the Division of Labor Standard Enforcements carry the interest rate of 10 percent per annum.  The interest accrues not from the date of the decision, but from the date on which the employee incurred the “necessary” expenditure or loss.  Attorney’s fees will be given to the plaintiff if this code section is enforced.

California Labor Code Section 2802 is not only outdated for today’s workplace, it is also a Pandora’s box as it does not take into consideration all the devices that an employee may use to conduct mandatory firm business. We don’t think the statute will be redefined with specificity this year.  As of the date of the writing of this blog, there have been no new California court cases on this issue and no new bills in the Legislature have been introduced to further define what constitutes “necessary expenditures” in the current workplace. We do expect, however, new litigation in this area of employment law to expand the list of which devices would be described as necessary for employees to perform their job functions.

At Narver Insurance, we believe there are strong steps your company can take to mitigate the chance of being embroiled in potentially expensive litigation. Review your BYOD policy concerning your employees. For those who have not adopted such a policy, now is the time to be proactive. A strong BYOD policy should address protocols such as a definition of what is “mandatory,” a list of what devices are covered under the policy, restrictions on authorized use, privacy and company access, safety, violations of use, termination of employment, and how to deal with lost, stolen, hacked or damaged equipment. Most important is the reimbursement portion of the agreement. To avoid being hit with a violation or a lawsuit concerning California Labor Code 2082, calculate a very reasonable reimbursement plan, or consider supplying your employees who telecommute or who conduct your firm’s business on a telephone away from the office, with a company-issued and paid-for cell phone. Also consider other electronic devices that may have program subscription fees or special charges, such as monthly Internet access charges.

The Cochran v Schwan’s Home Service, Inc. decision leaves many questions that will need to be answered by future court cases or changes in the Labor Code. In the meantime, consult with your HR department or your employment & labor attorney to guide your firm in revising or writing a comprehensive BYOD policy.  Call us at Narver Insurance. We are more than happy to answer any questions you may have concerning the insurance issues of BYOD.

This blog is for informational purposes only and is not for the purpose of offering legal advice. You should always contact your attorney to determine if this information and your interpretation of it is appropriate to your particular situation.