As personal technology devices (smartphones, tablets, etc.) proliferate, employees increasingly expect to be able to use them in the workplace. As the line between work and home continues to blur at the same time, many employers are developing their own Bring Your Own Device (“BYOD”) policies to help manage both trends. And now a legal challenge to a California company’s BYOD policy could potentially impact employers in other states (including Michigan) as the courts, too, grapple with the legal implications of these trends.

On August 12, 2014, the California Court of Appeal, Second Appellate District ruled in Cochran v Schwan’s Home Service, Inc. that employers must reimburse employees for some “reasonable percentage” of all business-related calls an employee makes or receives on his or her personal cell phone.  What makes this ruling compelling—and potentially expansive—is that the employee who initiated the action had an unlimited minutes plan on his phone and the employer was ordered to make the reimbursement whether or not the employee actually incurred any additional expenses from making work-related calls.

In this particular case, Colin Cochran filed a class-action suit against his employer, Schwan’s Home Service, Inc.. He alleged that the company failed to reimburse customer services managers for expenses related to work-related calls made on their personal cell phones. California has a state law that requires employers to indemnify employees for all necessary expenditures they incur in carrying out their job duties.

The trial court denied class certification for the claim, ruling that it was not suitable for class treatment because of the predominance of individual issues. Class members would need to be individually examined as to (1) whether they had unlimited plans for which they did not actually incur any additional work-related expense (2) whether the employee paid the cell phone charges a third party did, and (3) whether the employee purchased a different cell phone plan because of his or her work-related usage.   Due to the large size of the class (1,500 members) these inquires would be unmanageable, said the court.

The appellate court later disagreed with the trial court, ruling that it made erroneous assumptions about the state law. The trial court mistakenly assumed that (1) an employee does not incur any expenses if the cell phone charges are paid by a third person, or if the employee did not purchase a different cell phone plan because of work-related cell phone usage, and (2) liability could not be determined without examining the specifics of each class member’s cell phone plan.

The Court of Appeal ultimately reasoned that all three of the trial court’s concerns were irrelevant. The only relevant issue was whether the employer was required to reimburse the expense under California law.  To show liability, employees only needed to show that they were required to use their personal cell phone for work-related reasons and that they did not receive reimbursement.

The court stated: 

We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them.  Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills. 

The court did not provide any additional guidance defining what should be considered a “reasonable percentage.”

Note that the reasoning in this case means it could potentially impact employees’ costs for home internet access if they use their computers or other devices to access employer email. They could expect a percentage reimbursement as well.

Employers with operations and employees in California should review and update their BYOD policies to reflect reimbursement for use of personal cell phones and for data charges, and arrive at a reasonable percentage reimbursement if the actual cost cannot be determined.

Employers in Michigan and other states should continue to monitor cases regarding BYOD devices to see whether the California decision triggers a broader trend.

Sources: Mondaq 9/4/2014; Seyfarth Shaw LLP 8/18/14