The Illinois Wage Payment and Collection Act has been amended to require reimbursement of employees expenses, which may include higher ticket items like cellular phones, cellular data service fees, home computers and internet provider fees for employees who are expected to work remotely and more travel expenses. Effective January 1, 2019, employers of five or more employees are required to reimburse employees for "all necessary expenditures or losses" incurred by the employee within the employee's scope of employment and directly related to services performed for the employer." Impacted employers must update their employee reimbursement policies by January 1, 21019 to comply with the new amendment.
Illinois Reimbursement of Employee Expenses
Section 9.5 of the Illinois Wage Payment and Collection Act, titled "Reimbursement of employee expenses" states:
(a) An employer shall reimburse an employee for all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer. As used in this Section, "necessary expenditures" means 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. 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. An employee shall submit any necessary expenditure with appropriate supporting documentation within 30 calendar days after incurring the expense, except that an employer may provide additional time for submitting requests for reimbursement in a written expense reimbursement policy. Where supporting documentation is nonexistent, missing, or lost, the employee shall submit a signed statement regarding any such receipts.
(b) An employee is not entitled to reimbursement under this Section if (i) the employer has an established written expense reimbursement policy and (ii) the employee failed to comply with the written expense reimbursement policy. An employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure or the employer failed to comply with its own written expense reimbursement policy. If the written expense reimbursement policy of an employer establishes specifications or guidelines for necessary expenditures, the employer is not liable under this Section for the portion of the expenditure amount that exceeds the specifications or guidelines of the policy so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement.
(c) To ensure consistency with federal law, any rules adopted by the Department and interpretation of this Section shall be consistent and not in conflict with federal regulations and guidelines regarding employer requirements for reimbursement of employee expenses.820 ILCS 115/9.5
What Are Necessary Expenditures?
The Act defines "necessary expenditures" 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." While at first glance, it seems apparent that necessary expenditures will include reasonable expenditures and losses, what is "reasonable" and what expenses are "within the employee's scope of employment and directly related to services performed for the employer" is subject to interpretation.
Illinois' law is almost identical to a California law, California Labor Code Section 2802, which requires reimbursement of necessary expenditures. Under California Labor Code Section 2802, an employee is entitled to be reimbursed by his or her employer "for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer." It is anticipated that litigants making claims in Illinois will look to California for guidance as to what should be reimbursed.
The hottest items that will be subject to reasonable interpretation of "necessary expenditures" have to do with technology. We are a society that now functions through use of mobile technology. Employees have cell phones, laptops, and home computers, all which run at a cost to the employee. While the Act requires reimbursement for only expenditures that primarily benefit the employer, employees are using this technology to perform their jobs.
In California, attorneys have successfully argued that the law applies to remote access expenses, including:
- Cell phones: this may include the cost of the cell phones and cell phone data plans when employees are required to be in communication with the company.Supervisors call the personal cell phones and clients, customers, vendors or other third parties use the cell phone number for employment-related issues.
- Home computers: this may include the cost of the computer, remote access equipment and internet connection fees.
In California, employees have successfully argued that the employers must pay for these expenses even if the employee would have purchased the same phone, data plans and equipment regardless of their employment.
The 2014 California decision in Cochran v. Schwan's Home Service, Inc., 228 Cal. App. 4th 1137, 1144 (2014), is instructive.
The California court defined the threshold question in a class action suit for cellphone reimbursement as follow: "Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job?" The court answered: "The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee." The court further held that to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee's cell phone bill.
Employers will be expected to reimburse for miles for the purposes of employment for any expense other than reasonable commuting expenses. This may include trips to suppliers, vendors and customers or other offices when they are not one of the usual offices where the individual works.
Included in this is required work travel. Employers will be expected to pay all reasonable expenses for such things as attending seminars, meeting with clients and customers, and not just a portion of the expenses. This may include paying for insurance or damage to a rental or an employee's car when the employee is not at fault.
Education and licensing
Where additional continuing education or licensing is required, employers may be responsible for paying for these additional fees, including all reasonable expenses related to attending the continuing educational seminars or training.
What can employers do to limit liability?
Illinois' Act has a provision that permits employers to set forth rules related to how they are going to reimburse necessary expenses.
Unlike California, Illinois employers are not required to reimburse an expense if an employer has “an established written reimbursement policy” and the employee fails to comply with the policy:
[a]n employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure, or the employer failed to comply with its own written expense reimbursement policy.
In addition, under the new Illinois law, the employee is required to submit documentation within 30 days after incurring the expense, although this deadline may be extended (although not shortened) by the employer through written policy.
Employee Reimbursement Policies Best Practices
All employers should examine their current practices, and make sure that, by January 1, 2019, they comply with the new law. Having a written policy that clearly sets forth what expenses are authorized, the amounts that are authorized, and specific requirements for reimbursement is the best way to protect employers from future liability for violation of the Act.
If you have any questions regarding the Illinois Wage Payment and Collection Act, or need assistance drafting a policy that complies with the Act, please contact Kristin Tauras at Mcknna Storer. Kristin focuses her practice on employment law and employment litigation.