In the current age of the technological revolution, mobile devices have become widely used in nearly every facet of life. Most Americans use their phones for almost all of their daily activities, from transportation and travel to shopping and dining. In fact, according to NY Post, the average person picks up their phone approximately every 12 minutes, or 80 times a day! It makes sense, then, that many companies expect their employees to use their phone for a variety of work tasks, such as clocking in and out, taking client or customer calls, and communicating with other team members. However, if the employee is using their personal device for these tasks and is not receiving reimbursement, the business could fall into legal trouble.
According to Accounting Web, ABM was recently found in violation of section 2802 of the California Labor Code, which outlines compensation requirements for companies that ask employees to use mobile devices for work purposes. Even though ABM employees only used their personal devices for job functions a few minutes every day, since the company was not reimbursing them for their data charges, the employees began the legal process to seek financial restitution. As a result, the company settled for over five million dollars, and could have been liable for over 3 times that much if the case had gone to trial.
While this case is California-specific and each state has its own laws regarding reimbursement for mobile device usage, there is an important lesson for business owners everywhere in ABM’s story. Having a plan for employee reimbursement for mixed-use assets is essential for protecting any company against legal trouble. While there are standard methods for reimbursing employees for some expenses, such as mileage for work-related transportation costs, mobile device usage is still fairly new, and doesn’t have many black-and-white guidelines in place.
Because of this, many business owners choose to reimburse the employee with a flat-rate stipend or by paying for a device outright. Unfortunately, these methods are often inaccurate and overly expensive.
So What’s the Safest Way to Reimburse Employees for Mobile Device Usage?
The best (and safest) way to reimburse employees for use of mobile devices for work-related tasks is employing the Fixed and Variable Rate (FAVR) technique. Using this methodology consists of calculating any fixed costs associated with the device (such as the cost of the phone itself, carrier fees, and data plans) as well as all variable costs (such as repairs, usage fees, etc.) on an individual basis. While this does mean a bit more work in the short-term, it may save you money over time, especially since this method makes it possible to utilize an IRS-recognized tax-free reimbursement option.
Making sure that employees are properly compensated for mobile device usage is important for only for legal protection, but also for your bottom line. In keeping employees happy and reimbursing them for actual expenses using the FAVR method, you are doing your business a service that will continue to benefit you in the long term.