Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
The Illinois legislature recently amended the state's Wage Payment and Collection Act (IWPCA) to require that employers reimburse employees for all reasonable “necessary expenses” that are “directly related to services performed for [the] employer” and incurred primarily for the benefit of the employer. The governor signed the law, which took effect January 1, 2019.1 Illinois is now the ninth jurisdiction to impose expense reimbursement requirements on employers.2
Under the new law, for “necessary expenses” to be reimbursable:
- the employer must have “authorized or required” the employee to incur the expense; and
- the expense reimbursement request must be submitted to the employer in writing within 30 calendar days of the date the expense was incurred, with appropriate documentation proving the expense (i.e., receipts). An employee may provide a signed statement regarding the expense in lieu of a receipt when supporting documentation has been lost or does not exist.
The new Illinois expense reimbursement obligation is patterned after a nearly identical requirement in California. One difference from the California obligation is that Illinois’ new expense reimbursement law allows employers to establish written expense reimbursement policies specifying the permissible amounts for expenditures along with other requirements for reimbursement. When an employer maintains “an established written expense reimbursement policy” with guidelines or specifications for necessary expenses that complies with the law, an employer is not liable for expense reimbursements that violate the policy or that exceed the policy’s permitted expenditure amounts, “so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement.”
Although Illinois employers must wait and see how courts interpret the new law, court decisions from California interpreting nearly identical language are instructive. Reimbursable expenses include traditional business-related expenses like transportation and travel expenses, business meals, and entertainment expenses. However, California courts have consistently held that employers must also reimburse employees for business-related expenses related to use of their personal cell phones or other devices regardless of the marginal or non-existent cost to employees. So, even where employees have personal unlimited phone/data plans and incur no additional expenses by using their personal devices for work purposes, California courts have required employers to reimburse a reasonable percentage of these expenses if employees must use these devices in performing services related to their employment and primarily for the benefit of the employer. Because of this potential liability, employers may want to consider addressing this issue in a written policy. The Illinois statute may allow employers a better opportunity to manage this type of expense than the courts have allowed companies with employees in California.
Companies with employees in Illinois should immediately review their workplace policies with their employment counsel to ensure compliance with the new expense reimbursement law and that those policies take full advantage of the right under the Illinois statute to limit reimbursement of certain expenses. At a minimum, there should be a written policy that specifies the types of expenses that are “necessary expenses” and reimbursable, how expenses related to personal device will be reimbursed (e.g., will the employer use a flat/fixed amount across the board or will it reimburse a proportionate amount of the expense?), and the procedure for timely submitting requests for expense reimbursement.
1 See 820 ILCS 115/9.5.
2 California, the District of Columbia, Iowa, Massachusetts, Montana, New Hampshire, North Dakota, and South Dakota also have some form of expense reimbursement legislation. In Massachusetts, for example, minimum wage law requires employers to reimburse employees for certain travel related expenses. See 454 Mass. Code. Regs. 27.04(4)(b) (“If an employee who regularly works at a fixed location is required to report to a location other than his or her regular work site, the employee shall be compensated for all travel time in excess of his or her ordinary travel time between home and work and shall be reimbursed for associated transportation expenses.”) and 454 Mass. Code. Regs. 27.04(4)(d) (“An employee required or directed to travel from one place to another after the beginning of or before the close of the work day shall be compensated for all travel time and shall be reimbursed for all transportation expenses.”) While there are currently no Massachusetts statutory, regulatory, or judicial authorities expressly mandating the reimbursement of employees' expenses related to personal cell phones used for work, employers have faced legal challenges on these types of issues. See Two Recent Decisions Expand Scope of Massachusetts Wage Act, Littler ASAP (June 26, 2013).