California generally provides heightened protection for individual privacy rights. Consistent with protecting individual privacy rights, the California Supreme Court recently ruled that both parties and nonparties must get consent from everyone on a cellular or wireless telephone call before making a recording of the call. From a legal perspective, the most important question in the recording context is whether consent must be obtained from one or all parties to a wireless communication before recording it. Federal law and many state statutes from other states permit recording if one party to the telephone call or conversation consents.

In California, however, not only is it a criminal offense to record a communication without consent of all parties, but it can also potentially give an injured party a civil claim for money damages. Individuals and businesses often have a need or desire to record telephone conversations that relate to their business dealings or customers. California law applies when you and the person you are recording are both located in California. Anyone in California who records telephone calls should know and understand California law on the subject, as even minor violations can carry significant consequences.

In Smith v. LoanMe, Inc. (2021) WL 1217873, the California Supreme Court struck down a California Court of Appeals ruling which held that only third-party eavesdroppers needed to obtain consent to record a phone call.  The Court of Appeals had held that California Penal Code section 632.7 did not forbid one party in a call on a cellular or cordless telephone from recording the call without the other party’s consent. The California Supreme Court disagreed, holding instead that the statute applies to both active participants on the telephone call and non-participants alike.

The facts giving rise to the case are rather succinct. LoanMe extended a loan to plaintiff’s wife, after which a LoanMe employee called a phone number provided by plaintiff’s wife. The employee reached plaintiff Jeremiah Smith instead. Plaintiff answered the phone on a wireless telephone and informed the employee that his wife was not home. The call was brief- lasting only 18 seconds. The LoanMe employee recorded the call but did not inform plaintiff that the call was being recorded. In September 2016, plaintiff filed a class action consisting of anyone in California whose calls on a wireless telephone with LoanMe were recorded without their consent by LoanMe within one year of September 2016. The complaint alleged that the recording of these calls violated California law.

The trial court dismissed the action. The Court of Appeals ultimately concluded that California law prohibits only nonparty eavesdroppers from intentionally recording phone conversations. The California Supreme Court reversed the Court of Appeal ruling and allowed the class action to move forward. The Supreme Court reasoned that Penal Code section 632.7 is a general prohibition against the intentional recording of a covered communication without the consent of all parties, regardless of whether the recording is performed by a party to the communication or by someone else.

While it is common business practice to inform incoming callers that the call may be recorded, businesses should also be mindful to implement this practice on outbound calls. Businesses should train employees to immediately inform the person answering the telephone that the call is being recorded and to obtain consent to continue to do so. This simple step can potentially save a business from costly litigation and penalties.