The new year brought a new concern for Illinois employers: a mandatory expense reimbursement law. As of January 1, 2019, Illinois employers must reimburse all “necessary expenditures” their employees incur in the scope of employment directly related to services performed by the employer.
The amendment to the Illinois Wage Payment Collection Act (IWPCA) defines “necessary expenditures” as “all reasonable expenditures … required of the employee in the discharge of employment duties and that inure to the primary benefit of the employer.” 820 ILCS 115/9.5.
The amended law is applicable where:
- the employer “authorized or required” the employee to incur the expense; and
- the expense request, along with appropriate documentation, was submitted within 30 calendar days – unless a longer period is provided for by the employer.
Written reimbursement policies
Critically, the IWPCA amendment does not apply if the employee fails to comply with “an established written expense reimbursement policy.” For example, if a written policy sets reimbursement caps for various categories of expenses, the employer need not reimburse expenses in excess of the policy’s parameters.
However, the written policy must provide for more than “de minimis” reimbursement. At this time, there is no guidance as to what does, or does not, constitute “de minimis” reimbursement. Employers should therefore consider setting any reimbursement caps at reasonable levels based on the local market where the expenses will likely be incurred.
Context and guidance for employers
This amendment makes Illinois the ninth U.S. jurisdiction to statutorily impose expense reimbursement requirements on employers (joining California, the District of Columbia, Iowa, Massachusetts, Montana, New Hampshire, North Dakota, and South Dakota). Illinois employers should pay special attention to the following considerations:
- BYOD danger – With the rise of “bring your own device” (BYOD) policies and employees’ use of personal electronics for business, employers must determine if the use of such devices constitutes a reimbursable business expense. Illinois courts have not yet interpreted the new law, but California courts interpreting nearly identical language have found that data plans, Internet bills, and other electronics expenses trigger reimbursement regardless of the seemingly marginal cost to employees.
- Vehicle and mileage programs – Companies providing employees with owned or leased vehicles should consider all peripheral costs an employee could be incurring, such as routine maintenance. Similarly, employers providing a flat rate each month for the expense of driving personal vehicles for company business should consider whether workers driving in an area with higher gas prices may be under reimbursed. Without tracking actual costs, companies paying a flat rate may now face liability under the IWPCA.
- Negligence, loss, theft – An employer is not responsible for losses due to an employee’s own negligence, losses due to normal wear, or losses due to theft, unless the theft was a result of the employer’s negligence.
- Timing – Employers may not require employees to submit expenses less than 30 days after incurring them, but may allow employees more than 30 days to submit expenses.
- Documentation – Expense policies may not strictly require a receipt or other specific supporting documents. If an employee cannot produce a receipt or other documentation, the employer must accept the employee’s own “signed statement” instead.
- Have a written plan – Unlike some jurisdictions, Illinois’s law allows employers to establish written expense reimbursement policies specifying the amounts and requirements for any such reimbursements, so long as the plans are not written in a way to avoid reasonable reimbursement of expenses.
- Know the law – Even if the type or amount of expenditure would violate an employer’s written plan, reimbursement may still be required if the employer “authorized” or “required” a particular expenditure. Unfortunately, these terms are undefined in the law, leaving employers to wait for administrative or judicial guidance.
Given the changing statutory landscape, now is a good time for employers to review their expense reimbursement policies to ensure business needs and legal compliance align.