Effective January 1, 2019, the Illinois Wage Payment and Collection Act (IWPCA), 820 ILCS 115/1 et seq., requires employers to reimburse employees for all “necessary expenditures” or losses that an employee incurs in the scope of their employment. Prior to the amendment, Illinois law generally did not require employers to reimburse employees for business expenses. Illinois is now the ninth state to impose such a reimbursement requirement on employers—joining states such as California, Iowa, and New Hampshire which have similar laws.
The 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.” In addition to the necessary expenditure requirement, for an expense to be reimbursable: (1) the employer must have “authorized or required” the expense; and (2) the employee must request reimbursement of the expense incurred along with all appropriate documentation validating the expense within 30 days of incurring the expense—unless the employer’s reimbursement policy provides for a longer period. The law specifically excludes the following types of losses from those that an employer is obligated to reimburse: (1) losses due to an employee’s own negligence; (2) losses due to normal wear; and (3) losses due to theft unless the theft was a result of the employer’s negligence.
Employers with preexisting written expense reimbursement policies are given additional protections under the latest amendment of the IWPCA. For instance, an employer with a preexisting written expense reimbursement policy will not be liable for failing to reimburse an employee if the employee does not comply with the requirements of that policy for requesting reimbursements. Additionally, an employer will not be liable for failing to reimburse an employee for expenses that exceed the expenditure limits contained in the employer’s policy (“so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement.” 820 ILCS 115/9.5). In such instances, the employer is only required to reimburse up to the maximum amount specified for that expense in its written policy.
For employers without a written expense reimbursement policy, the IWPCA allows employers to establish a written policy which specifies the requirements for reimbursement and the maximum reimbursable amounts for expenses. The policies should outline the procedures for expense reimbursement. In addition, the policy should provide the deadline for submitting reimbursement requests and should specify the necessary documentation, such as receipts, that are required to support each expenditure. When setting maximum expense amounts, the employer must be mindful of the de minimis threshold and ensure that maximum amounts are reasonable. Employers with an existing written reimbursement policy should have their plan reviewed by an experienced employment law attorney to ensure that the policy complies with the 2019 amendment to the IWPCA. Similarly, employers currently without a written reimbursement policy could benefit from having an employment attorney draft an IWPCA-compliant policy.
One issue that will likely be heavily litigated in the coming years is reimbursement requirements for employers with “Bring Your Own Device” (BYOD) policies. This amendment arguably could be interpreted to require employers to reimburse employees for use of their personal cell phone for business use. Employers will likely counter by arguing that the “inure to the primary benefit of the employer” requirement allows them to refuse to reimburse expenditures for cell phone and data plan expenses that an employee would have incurred for personal use regardless of the need to also use the device and data for work. Since the statute does not specify how these situations should be handled, it will be left to the courts to answer these questions and provide guidance to all employers in Illinois.
A well-written expense reimbursement policy crafted by an employment law attorney can help to clarify to employers and employees alike what expenses will reasonably be reimbursed. It can also help to prevent expensive litigation (or help an employer prevail if such litigation occurs). We have litigated and defended employee wage claims for decades in the trial and appellate courts including obtaining our clients in the aggregate hundreds of thousands of dollars in attorneys fees in addition to reimbursement of all lost wages.
Super Lawyers named Illinois business and employment law trial attorney Peter Lubin a Super Lawyer and Illinois employment and business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex employment, wage law violation, overtime, class action, collective action, non-compete agreement, discrimination and various other types of business and commercial litigation disputes. Our Waukegan and Lake Forest business dispute lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling at 630-333-0333. You can also contact us online here.