California cell-phone ruling poses big BYOD challenge

 A recent California appellate court ruling could hurt efforts to implement bring-your-own-device (BYOD) policies nationwide, analysts agreed Tuesday.

On Aug. 12, California’s Second District Court of Appeal ruled that companies with employees in California must reimburse those employees for work-related voice calls on their personal cellphones. The ruling came in Cochran v. Schwan’s Home Service.

The court upheld a class-action lawsuit brought by Colin Cochran in 2012 on behalf of 1,500 other service managers employed by Schwan’s, a company that delivers frozen food and meals to customers’  homes. The workers used their personal cellphones to contact customers about their orders and delivery.

In its finding, the three-judge panel cited California labor code and noted, “We hold that when employees must use their personal cell phone 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.”

Schwan’s had argued that employees with unlimited plans don’t incur added expenses when they use their personal phones for work.

Lawyers and technology analysts said the eight-page ruling raised the potential for confusion over the question of whether the use of other technologies might also require reimbursements. They noted that employees might be entitled to reimbursement for Skype calls and data service usage, or even for business-related uses of personal tablets, smartphones or laptops.

“The California ruling will sidetrack BYOD for some companies, but it shouldn’t,” said David Johnson, an analyst at Forrester Research, in an interview on Tuesday.

Johnson said that Forrester has researched laws similar to California’s Section 2802 in other states, and he said only Massachusetts has a law that comes close. That leaves 48 states where businesses could probably ignore the California ruling, but not necessarily.

“Right now, there is no requirement for reimbursement in other states that don’t have similar laws; however, it is still a reasonable policy for companies to reimburse employees for their expenses to do their job,” Johnson said. He added that “just about anything an employee has to spend money on should be included, including software, file sharing services, and even Skype.”

Because the law only applies in California and the ruling applies to reimbursement for phone calls, Johnson expects “there will be a lot of confusion about what it means for a company for a while, and [there will be] a lot of battles with IT and business leaders about how much risk they are willing to take.”

Even before the ruling, Johnson said many companies were “turning a blind eye” to the implications of BYOD, including reimbursement for personal devices and the services they provide.

“Companies need to formalize their BYOD policies and invest in mobile device management tools to make sure personally owned technology is compliant” with company procedures, Johnson added.

“A large number of workers are spending their money out of pocket” for personal technology related to work, Johnson said. “Some organizations don’t believe that’s happening and are ignoring it.”

Johnson and several other Forrester analysts wrote in a six-page report to their clients that the Cochran ruling “shapes, but will not shut down, enterprise BYO programs.… The ruling underscores the importance of having a clearly defined policy and strategy for BYOD for your organization — especially if your firm has employees in California.”

Forrester added that BYOD programs “will remain legitimate and relevant … BYOD is too much a workforce enabler for momentum to stop.” Based on Forrester surveys, 54% of U.S. information workers pay their entire mobile phone data bill for phones they use for work, while 19% say their company pays the bill directly, 7% say they are reimbursed and 13% receive partial reimbursement.

The Cochran ruling is expected to go well beyond reimbursement for voice calls in future rulings to include data service use and even use of home Internet service for work-related tasks such as checking email, Forrester said.

While Forrester’s report appealed to companies to use a reasonableness standard in reimbursing employees, one consultant told CIO.com, a sister website to Computerworld, that the Cochran ruling could be dire for BYOD. “I think this is going to be a deal-killer for a lot of companies, especially those that have a significant California employee base,” said Hyoun Park, principal consultant at DataHive Consulting. “This is the first real ruling that has been binding in the BYOD space.”

Diane Kimberlin, an employment lawyer at Littler Mendelson, said employers should “conduct a careful and wide-ranging review of their reimbursement policies and take a hard look at what actually happens ‘in the field.'”

She agreed with Johnson and others that the reimbursements covered by the Cochran case aren’t limited to personal cellphone calls and could apply to use of home Internet service and other technologies. “Employers should also think about their workplace practices to identify any sort of personal assets that employees may use for their jobs in order to make reasoned decisions about how to manage the issues raised by Cochran,” Kimberlin said.

A pivotal issue in the Cochran case was whether a worker’s expenses are deemed “necessary,” for work, which the appellate court tried to explain midway in its ruling:

“The threshold question in this case is this: Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee,” the court said.

“Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill. Because of the differences in cell phone plans and worked-related scenarios, the calculation of reimbursement must be left to the trial court and parties in each particular case,” the court said.