Employee Expense Reimbursement Now Mandatory in Illinois

Published on October 31st, 2019

Employee expense reimbursement is now required by law in Illinois, at least under certain circumstances, making the Land of Lincoln the ninth U.S. jurisdiction to statutorily impose such a requirement.   In doing so, Illinois joins the company of other states with similar rules.   Employers of all shapes and sizes should get up to speed on the new law, an amendment to the Illinois Wage Payment Collection Act that took effect on January 1, which requires employers to reimburse all “necessary expenditures” directly related to the employer’s services.

The new law (820 ILCS 115/9.5) defines “necessary” as “all reasonable expenditures … required of the employee in the discharge of employment duties and that inure to the primary benefit of the employer.” This means that the employer must have either “authorized or required” the employee to purchase the product or service and must receive appropriate documentation within 30 days—unless the employer allows for a longer time frame.

Employers should have written expense reimbursement policies that lay out what they pay for and how much, along with what’s requested in terms of documentation; although if an employee cannot produce this documentation, such as a receipt, the employer must accept a “signed statement” from the employee instead.   This written policy can set caps for different categories of expenses and the employer does not need to reimburse more than the capped amount, provided the caps amount to more than “de minimis” reimbursement—a term the amendment does not define. In other words, the best guideline one can follow is: be reasonable, based on costs in your area.

Employers that offer “bring your own device” policies, based on which employees use their own cell phones or other devices for business purposes, will need to sort out whether this can lead to reimbursable business expenses. While the courts in Illinois have not yet ruled, their counterparts in California—which has nearly identical statutory language—have found that Internet bills, data plans and other electronic expenses can require at least some degree of employer reimbursement.

Companies that have vehicle or mileage programs—whether by providing company-owned or leased vehicles, or paying a flat rate for the expenses involved in driving a personal vehicle for company business—will need to readjust their parameters. Those in the former category will need to account for peripheral costs like routine maintenance, which an employee might have previously covered, while those reimbursing for personal vehicles with a flat fee will need to calculate a rate based on gas prices in a given area.

Losses due to an employee’s own negligence, normal wear and tear, and theft are not an employer’s responsibility—unless a theft was due to the employer being negligent.

The courts doubtless will weigh in on at least some of these provisions in the coming months and years. For now, the best move for employers is to review their expense reimbursement policies to ensure that they make sense from both a bottom line and legal compliance perspective.   Employers should consult with experienced Chicago Business Lawyers to protect themselves from the many employment laws facing employers.

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