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Scopelitis Labor & Employment eNewsletter: A Note on New Requirements for the Reimbursement of Employee Expenses

by A. Jack Finklea, Sara L. Pettinger, David D. Robinson, Donald J. Vogel

Dec 27, 2018

 

A Note on New Requirements for the Reimbursement of Employee Expenses

Illinois recently became the ninth state or district to mandate reimbursement of an employee’s expenses. The new amendment to the Illinois Wage Payment and Collection Act, effective January 1, 2019, requires reimbursement for all “necessary expenditures or losses” incurred by an employee within the employee’s scope of employment. Illinois’ new requirement looks much like California’s reimbursement requirement under California Labor Code Section 2802. Treatment by the courts may therefore follow suit, at least with respect to the type of expenses that may be deemed reimbursable.

Lesson 1: Required Reimbursements Likely Include Mileage and Cell Phone Expense

A “necessary expenditure” under the new Illinois statute includes costs required of the employee yet which primarily benefit the employer. Although specific examples are not included in the statute, it seems reasonably certain that expenses related to mileage reimbursement for travel during a shift, uniforms, and required cell phone or internet access would be included. On the other hand, although some losses must be reimbursed, losses due to an employee’s negligence, normal wear, or theft are generally not included.

Lesson 2: A Written Policy May Limit Reimbursement Amounts

A written expense reimbursement policy should be implemented, and it should reiterate the statute’s limit on reimbursements to expenses supported by a receipt turned in within 30 days of incurring the expense. What is more, a written policy on reimbursements can limit the reimbursement to reasonable amounts, even if the actual expense is greater. For example, an acceptable policy may state that cell phone expenses will be reimbursed at a particular monthly rate even if an employee’s actual rate is much higher, as long as the reimbursed rate is not so low as to be considered non-existent or de minimis.

Lesson 3: State Requirements Aside, Federal Law Speaks to Employee Expenses

Employers who have no operations in the nine states or districts that now require reimbursement of expenses must nevertheless consider federal wage and hour laws relating to employee expenses. Although no express federal reimbursement provisions exist, expenses incurred by employees will be considered in determining whether an employer has complied with the Fair Labor Standards Act’s minimum wage requirement. Specifically, only “free and clear” amounts paid to employees are considered in the minimum wage calculation. Expenses incurred by employees for the benefit of the employer, e.g. – fuel for an employee-owned vehicle on company business, would not be considered free and clear and would therefore detract from the employee’s stated hourly rate.

The new Illinois reimbursement requirement is contained within a statute that expressly provides not only for penalties, but also for potential class action treatment. California’s provision has of course spawned a multitude of class action complaints against motor carriers, and the new Illinois provision may, itself, lead to a substantial increase in class action filings in Illinois. Protections and liability limitations nevertheless exist. For questions relating to reimbursement obligations and compliance, please contact Jack Finklea, David Robinson, Don Vogel, or Sara Pettinger.

 

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Scopelitis practice area newsletters are intended as reports to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.

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