By Josh Long

California’s labor code requires employers reimburse their employees when they use their mobile phones for work-related calls, a state appellate court held, raising a question for the telecommunications industry: Will the decision discourage corporations from allowing workers to use their own gadgets?

“Whether the employees have cellphone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills,” the Second Appellate District stated.

The decision was handed down in an era when an increasing number of employees use their smartphones, tablet computers and other personal devices at the corporate office, home office and on the road. Thirty-eight percent of companies expect to stop providing devices to workers by 2016, according to a 2013 global survey of CIOs by Gartner.

The ruling, however, raises the question of whether the bring-your-own-device (BYOD) trend in the workplace – at least in California – will lose steam since employers must reimburse their workers.

“I don’t foresee this ruling will have any impact at all on the BYOD trend,” said Andrew Pryfogle, senior vice president, Cloud Transformation, at Petaluma, California-based Intelisys, a technology services distributor of telecommunications network services in the channel. “The benefits to a business are not just that they don’t pay for a cell bill for an employee. Most are already reimbursing for cell usage expenses when employees use their own device for business purposes.”

BYOD appeals to employers, Pryfogle said, because they “no longer have to buy, distribute, control and manage devices.”

“Employees can bring the device of their choice, and with the right MDM strategy, the employer can still control their secure data and available applications,” he explained. “This is rapidly moving beyond a ‘trend’ and into mass adoption. Why? It simply makes better business sense.”

Mike Saxby, vice president of Cellular Optimization, a New York-based consultant and mobility managed service provider that helps companies reduce their mobile expenses, has a different perspective.

He said employees who use their mobile phones at work create security risks for a company because the organization doesn’t own the phone number or anything else on the device. And if users need to access company assets, “IT finds itself having to support every device out there,” he said.

“The internal support costs very quickly begin to outweigh the savings they believed they have delivered from going to BYOD,” Saxby said.

Tem Wu, director of wireless at master agency WTG, gave us his perspective on how the ruling might impact the agent opportunity, saying that it depends on the final outcome.

“Will the reimbursement be based on a daily dollar amount, a per-minute/per KB amount, or a fixed percentage based on job description?” Wu wonders. “The low cost of cellphone plans today makes it much more attractive for a company to provide a company-liable cellphone than to purchase software to determine personal vs. business use. It’s near impossible to maintain an accurate database of business phone numbers and personal numbers as many businesses utilize cell phones instead of landlines. Alternatively, a method to classify calls made during business hours as business calls could be used; however, we know that a person with only one cellphone will use [that phone] for personal communication by voice, text, or data throughout the day.”

The appellate decision was based on state law so the immediate consequences of it are limited to the Golden State.

The court relied on California Labor Code 2802a, which declares an “employer shall indemnify his or 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 of the employer.” 

An employer’s obligation to reimburse an employee for cellphone expenses is not limited to additional expenses an employee has incurred absent the position, the Second Appellate District held.

“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 explained. “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 cellphone plans and worked-related scenarios, the calculation of reimbursement must be left to the trial court and parties in each particular case.”

The ruling leaves open the possibility that employees would argue in future disputes with their employers that California law requires reimbursement for other cellphone expenses, namely those related to text messaging and data consumption, which often constitute the lion’s share of mobile expenses.

Saxby said the ruling is another reason for companies to rethink the BYOD strategy.

“Companies that are dealing with escalating supporting costs, security concerns and risks are questioning whether BYOD” is the right decision, he said. “They are re-engaging companies like ours and discovering they can have very significant savings … while having a controlled environment that is easier to manage.”

The court decision relates to a proposed class-action lawsuit that was filed against Schwan’s Home Service, Inc., seeking reimbursement of work-related cell phone expenses.

Whether it will stand as California law is unclear. Matthew C. Sgnilek, a Kutak Rock LLP attorney representing Schwan’s Home Service in the case, didn’t respond by deadline to a request for comment on whether he planned an appeal.