January 7, 2019

Illinois Expands Employee Expense Reimbursement Requirements

Holland & Knight Alert
Jennifer J. Froehlich | Phillip M. Schreiber

HIGHLIGHTS:

  • An amendment to the Illinois Wage Payment and Collection Act mandates reimbursement of certain employee expenses.
  • Development of a detailed expense reimbursement policy for Illinois employees is strongly advised.

An amendment to the Illinois Wage Payment and Collection Act went into effect on Jan. 1, 2019, requiring employer reimbursement of certain employee expenses. Prior to this amendment, the Act and its regulations were silent regarding reimbursement of employment-related expenses.

The amendment requires an employer to reimburse an employee for all "necessary expenditures or losses incurred by the employee[.]" To be compensable, such expenses have to be "within the employee's scope of employment and directly related to services performed for the employer." "Necessary expenditures" are defined as "all reasonable expenditures or losses required of the employee in the discharge of employment duties and that inure to the primary benefit of the employer." "Necessary expenditures" do not include losses suffered by the employee as a result of the employee's negligence, normal wear and tear, or workplace theft that does not result from the employer's negligence.

The scope of what constitutes a necessary expenditure may be quite broad. For example, an employee who uses a personal cellphone to perform his or her job duties has incurred a necessary expenditure with respect to a portion of the employee's wireless bill, even if the employee is on a flat, unlimited family plan.

To be compensable, employment-related expenses must first be authorized or required by the employer. The employee also must comply with the employer's written expense reimbursement policy (if one exists). Expenses that are above and beyond the guidelines in the employer's policy need not be reimbursed as long as the policy guidelines provide for more than de minimus reimbursement. The amendment does not define or provide guidance on what constitutes a "de minimus" reimbursement.

The amendment allows an employer to require an employee to submit reasonable supporting documentation for the expense to be reimbursed within 30 days of the employee incurring the expense. Where supporting documentation is "nonexistent, missing, or lost," an employee must request reimbursement within the 30-day limit by submitting a signed statement regarding the lack of documentation.

Next Steps for Illinois Employers

Moving forward, employers in Illinois should review their existing expense reimbursement policies (or draft one) to ensure compliance with the law. Policies should be detailed, outlining what expenses always are subject to reimbursement, how approval for the reimbursement of other expenses is obtained, caps on expense reimbursement that are more than de minimus, the documentation that must be submitted to support the expense reimbursement request, the timing of any requests for reimbursement (not less than 30 days), to whom expense reimbursement requests are directed, the means of submitted expense reimbursement requests (e.g., electronically, paper) and any procedures to appeal a denial of a reimbursement request.

Until there is further clarification on what "de minimus" means in this context, it is suggested that caps be set at reasonable levels based on the local market where the expenses will be incurred.  


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.


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