Litigating California Wage & Hour and Labor Code Class Actions

employers should be able to defend existing chargeback systems as long as the
employees have acknowledged the system in writing and the chargeback is taken
only from incentive pay that is paid over and above a base wage.
The Koehl court also held that the chargeback at issue was not unconscionable. The
court noted that there was no element of unfair surprise given that the chargeback
system was common in the industry and was clearly disclosed to the employees.
Furthermore, given that the employees had a continuing duty to service the
customers, there was a valid basis for the employer to hold them responsible for
customers canceling internet service in the first three months. 86
Although the California Supreme Court denied review to both the Steinhebel and
Koehl decisions, it recently implicitly approved of those decisions in its Ralphs II
opinion. In discussing the limited scope of Section 221, the California Supreme Court
cited Steinhebel and Koehl with approval, effectively strengthening them as
precedents. 87
IV.
Reimbursement of Employee Expenses
A. The Duty to Reimburse Expenses Under Labor Code Section
2802
Labor Code Section 2802 requires an employer to “indemnify” its employees for “all
necessary expenditures incurred” in the course of their employment. This provision has
been in effect since 1937, and over the next sixty-plus years, litigation over Section 2802
focused almost exclusively on seeking “indemnification” from the employer in the narrow
insurance-context sense of the word—”to reimburse (another) for a loss suffered because
of a third party’s act or default.” 88
Plaintiffs have attempted to use Section 2802 as a vehicle to obtain reimbursement of
routine business expenses that employees incur in the course of their duties—such as
driving a car or talking on a cell phone. Before 2005, all the published cases under Section
2802 involved circumstances where an employee sought to have the employer pay the cost
of tools or equipment lost or damaged on the job, 89 or to indemnify the employee for the
86
87
88
89
Id.
Ralphs II, 42 Cal. 4th at 220.
BLACK’S LAW DICTIONARY, 342 (2d pocket ed. 2001).
See, e.g., Machinists Auto. Trades v. Utility Trailers Sales, 141 Cal. App. 3d 80 (1983) (mechanic entitled to
indemnification for loss of his tools from employer’s premises in a burglary when employer required that employee have
tools and leave them on employer’s premises); Earll v. McCoy, 116 Cal. App. 2d 44 (1953) (employee not entitled to
reimbursement under Section 2802 for tools lost in a fire on employer’s premises when employee was not required to
leave tools at the place of employment).
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