Legal considerations regarding smartphone use for business

Deb Shinder presents a number of legal questions to take into consideration when you write your company policies governing smartphone use.

Businesses can't do much these days without considering the potential legal ramifications. Large corporations will have in-house attorneys and entire staffs to advise them about legal questions, but smaller companies may not always run everything past their lawyers (often because they're struggling with tight budgets). Here are some legal issues that might come up in regard to your own or your employees' use of smartphones and other cell phones when conducting business.

Note: I am a small business owner with many years of experience, but I am not an attorney, so nothing in this post should be construed as legal advice.

Purchase or reimburse?

In many businesses, employees are mobile -- they work at customers' sites, they go out in the field to procure materials or solicit new clients, and they're expected to be on call nights and weekends. If your company is considering whether to provide employees with mobile phones or reimburse them for all or part of their personal cell phone expenses, you'll want to consider the cost of each option. It makes sense to assume that the company will have more control over the phone if you purchase it in the company's name, pay the monthly bills directly, and issue it to the employee. You should consult your attorney as to how this decision will affect legal issues that might arise regarding the use of the phone.

One consideration is that if the company purchases the smartphone, it owns the phone number assigned to that device. If the employee leaves the company, that phone number can be given to another employee. If the employee owns the phone and leaves the company, customers and other business contacts who had that phone number will no longer be able to use it to get in touch with the company.

You should also keep in mind that state laws vary widely, and employers and employees may have rights in one location that they don't have in another.

Dedicated to business?

If the company buys and issues the phone and pays the phone bill, will employees be required to use their phones for business use only, and carry a second phone for their own personal use? If so, you should have a written policy stipulating this, and employees should sign an agreement to abide by the policy when they're issued their phones.

Many companies tolerate a certain amount of personal use of the company-owned phone. If you decide to allow it, your policy should specify that employees will be required to pay for any services they access on the phone that cost extra, such as text messages, ringtone downloads, entertainment services, and navigation and mobile hotspot services (unless you pay for those so they can use them for business purposes).

Who owns the data?

An important consideration that you'll want to clarify when you issue phones or reimburse employees is who owns the data stored on the devices. Smartphones are really miniature computers and can have all the same sorts of data on them as resides on a desktop or a laptop computer (email messages, customer contact information, company documents and spreadsheets, and so forth), but almost always in the case of employee-owned phones and often in the case of employer-owned phones, the users will also store personal data on their phones. Who owns what?

If you're in a regulated industry, such as healthcare or financial services, it's important to remember that you may be mandated to protect the confidentiality of personal data pertaining to clients. If you own the phones, you can select the models that are most secure, and ensure that they are running the most up-to-date version of the smartphone operating system. In addition, you can enforce encryption of the data stored on them.

Management issues

What if the company buys and issues the smartphones, but when an employee quits the job or is terminated, the employee refuses to return the phone? If the phone is in the company's name, you should be able to contact the carrier and have the phone deactivated, and the number reassigned to someone else in the company.

Can you have the carrier use the phone's GPS functionality (or the cell tower triangulation method) to track down the user and retrieve the phone? What legal action can you take against the employee? Can you file theft charges, or would you have to take the former employee to civil court to get a judgment requiring the phone to be returned to you? If you merely reimburse an employee's mobile phone expenses, you wouldn't have to worry about any of these issues since the employee would keep the phone. However, you still need to think about whether and how you can make the former employee remove company data from the phone. Can you require the phone's storage be wiped (factory reset) to ensure that no company data is left on the device? If you have the technological capability to remotely wipe the phone, is it legal for you to do when the phone is owned by the employee?

Again, these are questions to ask your attorney in advance, and to take into consideration when you write your company policies governing cell phone use.

Employee monitoring

Another issue that you may want to consult your attorney about is whether you can legally track the employee's movements via the company cell phone. If you do track the employee, do you have to inform the individual that you're doing it? Can you track the employee during off-duty hours when they are carrying the company phone or only during business hours?

Can you require employees to keep their phones on all the time when they're away from the office? If you do, will you have to pay them "standby pay" for that time? It's technologically possible to turn a cell phone on remotely; is it legal for you to do this if an employee turns the phone off, and you want to get in touch and/or track their location?

Software is available for several phone platforms that can be installed on a cell phone to allow you to listen to and/or record conversations and remotely read call logs, email messages, and SMS messages. Is it legal for you to use such software to monitor your employees' company-issued phones? Do you have to notify them that you're doing so? These are questions you need to ask your attorney.

Liability issues

Another question to ask your attorney: What is the company's liability if an employee uses a company-owned cell phone as a platform for launching an attack, hacking into a network or computer, downloading child pornography, harassing someone, or committing other illegal acts? Could a wronged party sue the company as well as the individual employee, claiming that by using company equipment, the employee was acting as a representative of the company?

It's important for you to put policies in place that specifically prohibit employees from using company-issued phones for any illegal activities, or actions that would be likely to result in a civil suit. This helps protect the company by providing tangible evidence that the employee was acting outside the scope of employment.

What if the police need to seize the phone as evidence of a crime? The company may lose the use of it for a very long time as the case winds its way through the court system.

What if you purchase and issue a phone to an employee and it's defective and overheats or explodes, causing an injury? Could the employee sue you for issuing the defective phone? These may seem like far out scenarios, but it pays to be prepared for every eventuality.


This blog post is meant to serve as a starting point regarding some of the types of issues that can have legal ramifications, and some of the questions that you need to ask when you decide to provide (or reimburse for) employee smartphones. The article's purpose is not to provide answers to your legal questions -- only an attorney versed in your locality's applicable laws can do that for you.