California Labor Code 2802 requires your employer to reimburse you for all reasonable expenses necessary for doing your job. This includes reimbursing you for any business-required use of your personal cell phone.
You are entitled to a reimbursement that reflects a reasonable percentage of the actual cost of your cell phone bill. You are entitled to a partial payment of your cell phone expenses, even if your job did not require you to spend more than you ordinarily would have for your cell phone use.
The purpose of this broad reimbursement obligation in Labor Code 2802 is to prevent companies from passing their business expenses on to you and saving the employer’s business some money.1
Does the cell phone plan matter?
No. Under California law, reimbursement is required regardless of your cell phone plan. Even if you had unlimited minutes or unlimited data, you are still owed a percentage of your bills that reflects your work-related use.2
Can employers pay me a stipend or higher wages instead of reimbursements?
Yes. Employers in California are free to pay you a stipend or to increase your regular wages, rather than directly paying an expense reimbursement for your work-related cell phone usage.
An expense policy like this, though, has to distinguish between what is paid as a regular wage and what is reimbursement for your expenses.3
Can I waive my right to cell phone reimbursements?
Employers cannot get you to waive your rights to reimbursements for work expenses in California. Any provision in an employment contract that tries to do this is null and void.4
What is the federal law for work-related reimbursements?
Federal employment law generally does not require employers to reimburse employees for work-related expenses.
The Fair Labor Standards Act (FLSA) is silent on reimbursing employees for business expenses. The only time federal law requires a reimbursement is if it would bring your wages beneath the applicable minimum wage.5
Federal law is silent on cell phone expense reimbursements.
Can employers make their own cell phone reimbursement policy?
Yes, California employers can create their own policies and rules for reimbursing your cell phone use for business purposes. The policies, though, cannot contradict state or federal law.
Many employers adopt “bring your own device,” or BYOD, policies for employee cell phone use. These policies often have to outline how the reimbursement will be calculated. Many policies simply provide a flat payment for work-related phone use.
Some employers avoid reimbursement obligations by providing you mobile devices. These corporate-owned phones can be excluded from your wages as a working condition fringe benefit if the phone was provided for non-compensatory business reasons. Any personal use of these employer-provided phones can be treated as a de minimis fringe benefit, and also excluded from your wages.
Are these reimbursements taxed as income?
The tax treatment for reimbursements made for business-related cell phone use depends on three factors:
- Whether the phone use was necessary and ordinary for your job,
- Whether you returned any excess reimbursement within a reasonable amount of time, and
- Whether you substantiated the expense, often with receipts, expense reports, or the phone bill, within a reasonable amount of time.7
If these 3 conditions are met, then the reimbursement can be deducted from your taxes. If any of them are not met, then the reimbursement is taxable income.
Additional reading
For more information, refer to these articles:
- Cell Phone Stipend: A Win-Win Solution for Employers and Employees – by Benepass, a company that helps distribute employee benefits.
- Cell Phone & Internet Reimbursement Laws by State – by Mosey, a company that helps solve business compliance problems.
- Cell Phone Stipends: Everything You Need to Know – by Compt, a company that helps manage employee stipends.
- What is a Cell Phone Reimbursement Policy & How to Set One Up – by IncentFit, a company that rewards employees for making healthy choices.
- Cell Phone Reimbursement for Employees: Laws and Best Practices – by Fyle, a company that provides expense management for companies.
Legal References
- California Labor Code 2802. See also Herrera v. Zumiez (9th Cir. 2020) 953 F.3d 1063. Cochran v. Schwan’s Home Service, Inc. (2014) 228 Cal.App.4th 1137.
- Cochran v. Schwan’s Home Service, supra.
- Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 169 P.3d 889.
- California Labor Code 2804.
- In addition to California, the few states that passed labor laws that require employers to reimburse workers for work-related expenses are California, Illinois, Iowa, Massachusetts, Minnesota, Montana, New Hampshire, New York, Pennsylvania, and District of Columbia. The protection afforded by these laws, however, depends on the state. California Labor Code 2802. 820 Illinois Compiled Statute 115/9.5. Iowa Code 91A.3(6). Massachusetts General Law Chapter 149, § 148A and Fraelick v. PerkettPR, Inc. (2013) 83 Mass. App. Ct. 698. Minnesota Statute 177.24(4)-(5). Montana Code 39-2-701. New Hampshire Revised Statutes 275:57. New York Labor Law 198-C. 43 Pa. Stat. Ann 260.3. D.C. Municipal Regulation Title 7, Section 910.1.
- IRS Notice 2011-72.
- See IRS Publication 5137 (Rev. 2-2020).
