Employer Obligations for Employee Expenses - Rob Smeltzer [4/30/20]
Wednesday, April 29, 2020
EMPLOYER OBLIGATIONS FOR EMPLOYEE EXPENSES UNDER THE 2019 AMENDMENTS TO THE ILLINOIS WAGE PAYMENT & COLLECTION ACT
Effective January 1, 2019, the Illinois Wage Payment & Collection Act, 820 ILCS 115/1 et seq., was amended to add section 9.5, which creates a statutory obligation for employers to reimburse employees for certain necessary, work related expenses they incur whether during the course of employment or as part of “final compensation” upon termination. Specifically, the new section in relevant part states:
Sec. 9.5. Reimbursement of employee expenses.
(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.
Although the statute defines “necessary expenditures,” its definition is not clear regarding what it means when it talks of reasonable expenditures “required of the employee.” This immediately raises an issue as to whether expenses incurred for things not explicitly required or authorized by an employer (e.g. internet access, home computers, printers, printing paper, cell phones and other supplies used for work purposes) fall within the statutory definition of “necessary,” particularly for traveling or remote employees. The same goes for continuing education costs required by the state to maintain certain professional licenses.
Unlike some other states, however, Illinois’ new law mitigates potential employer liability for expenses not explicitly authorized with three provisos: (1) it states that an employer is not liable unless it authorized or required the employee to incur the necessary expenditure or the employer failed to comply with its own written expense reimbursement policy; (2) employees are not entitled to reimbursement if (i) the employer has an established written expense reimbursement policy and (ii) the employee failed to comply with the written expense reimbursement policy; and (3) an employee must submit necessary expenditures with supporting documentation within 30 calendar days after incurring the expense (unless a written expense policy provides for more time, or unless supporting documentation doesn’t exist or is lost, in which case the employee need only submit a signed statement).
In light of this statutory amendment, employers should adopt carefully-worded expense reimbursement policies, which: (1) require written authorization prior to incurring expenses; and/or (2) authorize only limited, identified types of expenditures up to certain monetary limits, while explicitly stating that any other expenditures not listed are not required and will NOT be reimbursed. Otherwise, they risk factual arguments from employees in court about whether expenses were informally authorized or required by managers or other supervisors. Given that prevailing employees are entitled to their attorneys’ fees under the IWPCA, this is not a battle employers will want to undertake if it can be avoided.
By Rob Smeltzer, litigator and counselor practicing in the areas of labor & employment law, intellectual property law, and business litigation for more than 25 years as is a member of Howard & Howard PLLC in Chicago. Rob has represented a wide variety of clients across an array of industries, including logistics, insurance brokerages and carriers, banks, credit unions and other financial institutions, food manufacturers, Fortune 500 companies, and numerous other mid-market private companies and individuals.