32 Litigating CA Wage & Hour and Labor Code Class Actions (22nd Edition) Seyfarth Shaw LLP | www.seyfarth.com For example, an employee’s choice of automobile will significantly affect the costs incurred. An employee who chooses an expensive model and replaces it frequently will incur substantially greater depreciation costs than an employee who chooses a lower priced model and replaces it less frequently. Similarly, some vehicles use substantially more fuel or require more frequent or more costly maintenance and repairs than others. The choice of vehicle will also affect insurance costs. Other employee choices, such as the brand and grade of gasoline or tires and the shop performing maintenance and repairs, will also affect the actual costs.173 Another decision issued around the same time as Gattuso, this one from the Court of Appeal, also held that employers must reimburse for employee business expenses. In Estrada v. FedEx Ground Package System, Inc.,174 three drivers brought a class action against FedEx, contending that for the limited purpose of their entitlement to reimbursement for work-related expenses, they were employees, not independent contractors, and thus were entitled to reimbursement of business expenses under Section 2802. Although FedEx maintained that payments it made as part of its operating agreement with the drivers provided reasonable compensation for expenses, the trial court disagreed and ordered FedEx to pay $5.3 million for underreimbursed expenses. The Court of Appeal affirmed in part and reversed in part. It affirmed the trial court’s central finding that the drivers were employees for purposes of Section 2802 and that FedEx had failed to indemnify the drivers fully for their business expenses as required by Section 2802. Estrada held that although the drivers were entitled to recover their out-of-pocket expenses and work accident insurance premiums, they were not entitled to reimbursement for the cost of purchasing trucks to perform the job. In essence, Estrada held that an employer may require employees to furnish their own vehicles to perform a job without indemnifying the employees for the cost of such purchases. Estrada’s reasoning also suggested that employers may be allowed to require employees to purchase other items as a pre-condition of employment, such as cell phones or computers, and that the requirement to furnish such items as a condition of employment does not violate the reimbursement requirements of Section 2802.175 In Cochran v. Schwan’s Home Service, Inc.,176 the Court of Appeal held that an employer that required its customer service managers to use their personal cell phones for business tasks must reimburse the managers for a reasonable percentage of their cell phone bills. The trial court had denied certification of a proposed class of 1,500 managers, reasoning that a class trial was unmanageable in light of individualized issues as to whether particular class members paid their own phone bills, and whether they had service plans that provided for 173 Id. at 568. 174 154 Cal. App. 4th 1 (2007). 175 DLSE Bulletin 84-7 states that “an applicant for employment may be required, as a condition of employment, to furnish his [ ] own automobile or truck to be used in the course of employment, regardless of the amount of wages paid.” Under Section 2802, “an employer who requires an employee to furnish his [ ] own car or truck to be used in the course of employment would be obligated to reimburse the employee for the costs necessarily incurred by the employee in using the car or truck in the course of employment.” 176 228 Cal. App. 4th 1137 (2014).
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