Expenses Can Be Expensive: Cochran v. Schwan’s Home Service, Inc. Revisited

Most California employers know that they have to reimburse employees for business-related expenses. Indeed, California Labor Code section 2802(a) provides that 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…” This requirement has led prudent employers to reimburse employees not only for such obvious costs as travel or mileage expenses, but for less obvious expenses such as the cost to dry clean a uniform that cannot be laundered. What California employers sometimes forget, however, is that employee expenses are not static. Rather, expenses can change as technologies and circumstances evolve.

Last fall the Cochran v. Schwan’s Home Service, Inc. case instructed employers to consider employee cell phones as part of the business expense equation. Specifically, the Cochran court held 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 guidance on what a reasonable reimbursement would be; it left that to the employer and employee to determine…as well as future courts to decide.

While some employers scrambled to implement proper cell phone reimbursement policies, others were left to ponder the real significance of the decision. Cochran did not establish any new law, it just applied old law to a new world. We live in a world in which devices and apps are commonplace and are used by employees almost without thinking, a world in which new technologies arrive at an increasingly faster pace. If employers apply the logic of Cochran and the language of 2802 to this new world, the implications are far reaching. Home Wifi, cell phone apps such as Waze or Evernote, office programs on a home computer or laptop; all of these can be considered necessary expenditures depending on the nature of use. Employers should take time to consider these workplace realities and address them now, or risk facing the consequences later on.

This blog is presented under protest by the law firm of Ervin Cohen & Jessup LLP.  It is essentially the random thoughts and opinions of someone who lives in the trenches of the war that often is employment law–he/she may well be a little shell-shocked.  So if you are thinking “woohoo, I just landed some free legal advice that will fix all my problems!”, think again.  This is commentary, people, a sketchy overview of some current legal issue with a dose of humor, but commentary nonetheless; as if Dennis Miller were a lawyer…and still mildly amusing.  No legal advice here; you would have to pay real US currency for that (unless you are my mom, and even then there are limits).  But feel free to contact us with your questions and comments—who knows, we might even answer you.  And if you want to spread this stuff around, feel free to do so, but please keep it in its present form (‘cause you can’t mess with this kind of poetry).  Big news: Copyright 2015.  All rights reserved; yep, all of them.

If you have any questions about this article, contact the writer directly, assuming he or she was brave enough to attach their name to it.  If you have any questions regarding this blog or your life in general, contact Kelly O. Scott, Esq., commander in chief of this blog and Head Honcho (official legal title) of ECJ’s Employment Law Department, at (310) 281-6348.


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