There’s nothing like a looming deadline to prompt action. Back in August, Governor Rauner signed into law an amendment to the Illinois Wage Payment and Collection Act that, for the first time, requires Illinois employers to reimburse employees for reasonable expenditures or losses required in the course of their employment duties and that primarily benefit the employer. Because the new law takes effect January 1, 2019, we’ve been receiving quite a few questions from employers about what they should be doing to comply. Right now, there is very little guidance on how the statute will be interpreted by the Illinois DOL or the courts, so anything we can say at the moment is provisional. With that caveat, here are a few preliminary “dos” and “don’t’s”:
DO have a written expense reimbursement policy. Even if you have a very small business and a workforce that should have few if any business expenses, having an express policy on employee express reimbursement is your best defense to claims under the new law. The statute expressly provides that an employer is “not required to reimburse expenses that are not authorized or required by the employer,” and permits employers to set caps on the amount of reimbursements.
DO be explicit about what you will and will not reimburse. If there are certain categories of expenses that your organization does not require employees to incur and for which you will not pay, say so in your policy. For example, if you have employees who sometimes elect to work from home for their personal convenience, you might state in your policy that working from home is not required, and that you will not reimburse employees who elect to work from home for any home phone or Internet service that they may use, because they have the option of coming in to the office. Similarly, if you will only reimburse for travel expenses up to a certain amount or require employees to use a specific travel provider, say so.
DO Include Reimbursement Procedures. Employees are entitled to reimbursement under the new law only if they comply with the employer’s written expense reimbursement policy. Because of this, it pays to be explicit. If you require employees to submit an electronic report, say so. If reports are due by a certain date, say so. (But see the note below about the 30-day rule.)
DO Include a catch-all provision for any expenses not expressly discussed. Your policy should address common expense categories that you know your employees might incur or ask about. However, trying to address every possible expense that employees might incur is an impossible task. For that reason, you should include language stating that employees must request advance approval before incurring any expense not expressly provided for in your policy. This is not necessarily a “get out of jail free” card, because it’s possible that employees might incur one-off expenses in circumstances that do not allow for prior approval. However, it may help avoid those recurring situations that present the largest risk of liability.
DON’T Refuse to reimburse for expenses legitimately required for the job. The main effect of the new law is to force employers to really give some thought to what they expect and require of employees. Say for example that your company uses an app-based timekeeping and scheduling system that employees access using their personal smartphones. If that is the only way that employees can record their time or check their schedules, having a smartphone with data service is arguably a requirement of the job, and you may have to reimburse employees for at least a portion of the cost of their device and monthly service. If you provide an alternative, like an onsite kiosk and local phone number where they can check their schedule, you might plausibly be able to say that having a smartphone is a convenience for employees, not a requirement of the job.
DON’T Set artificially low reimbursement rates. While the new law allows employers to set caps for what they will reimburse, it also provides that employers may not establish a “de minimus” reimbursement rate. So, if you have employees who routinely drive their personal vehicles between worksites during the work day, you can’t avoid the law by setting a mileage reimbursement rate of $.01 / mile. Right now we don’t have any guidance on exactly how far this principle goes, so employers should do their best to tie any reimbursement caps to employees’ reasonably anticipated expenses.
DON’T Require employees to request reimbursement sooner than 30 days after the expense is incurred. The statute provides that an employee must request reimbursement and provide documentation within 30 days after the expenditure. Although this is not expressly stated, the conservative interpretation is that while employers can give employees more than 30 days to request reimbursement, they cannot shorten the period. This may require employers to change how they administer expenses. Suppose for example that an employer requires employees to report expenses by the 10th day of each month for the preceding calendar month. Bob incurs an expense on November 30. Under the policy, Bob would have to report that expense by December 10. But under the new law, he would have 30 days, or until December 30. If Bob gets his expense report in within 30 days, his employer may be able to delay payment of his expense until January, but might run into trouble if it refused reimbursement altogether.
DO talk to your employment counsel and stay on top of developments under this new law. Right now there are more questions than answers, but we expect further guidance from the Illinois DOL and eventually the courts to emerge over time.