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Illinois Law Now Requires Employers to Reimburse Employee Business Expenses

Effective January 1, 2019, Illinois law requires employers to reimburse employees for qualifying expenses and losses incurred by employees in the course of their employment. This represents a significant change in Illinois law, and employers should update their expense reimbursement policies and practices in light of this change.

The change is in the form of an amendment to the Illinois Wage Payment and Collection Act, 820 ILCS § 115/1 et seq. Prior to the amendment, Illinois law generally did not require employers to reimburse employees for business expenses, although many employers did so as a matter of policy, at least with respect to certain expenses.

New Illinois Law

Not all expenses incurred by an employee in connection with his or her employment must be reimbursed. Rather, under the new law, Illinois employers are obligated to reimburse an employee for “all necessary expenditures or losses incurred within the employee’s scope of employment and directly related to the services performed for the employer.” 820 ILCS § 115/9.5(a). The law 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.”  The types of expenses that may be subject to reimbursement include business travel, customer entertainment, home office, and cellular telephone and data plan expenses, among others.

In addition, the employee must submit the reimbursement request to the employer with supporting documentation within 30 days after incurring the expense or experiencing the loss or within such longer period as permitted by the employer’s written expense reimbursement policy. Furthermore, if the employer maintains a written expense reimbursement policy, the employee must comply with the policy’s terms.

An employer, as part of a written expense reimbursement policy, may prescribe specifications or guidelines for necessary expenditures. Under the law, an employer is not required to reimburse employees for expenses that exceed those expenditure amounts as long as the limitations are reasonable.

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.

Lessons from California?

California and several other states have enacted similar laws. Under the California law, courts have required employers to reimburse employees for a variety of expenses, including the cost of cellular telephone data plans, Internet service, and other computing expenses.

However, there are differences between California law and the new Illinois law. Perhaps the most notable is the Illinois requirement that the expenditure “inure to the primary benefit of the employer.” This requirement is not present under California law.

It remains to be seen how the new Illinois law will be applied to “bring your own device” (BYOD) and other employer policies and practices. For example, it is uncertain if the provision limiting the reimbursement obligation to expenditures that “inure to the primary benefit of the employer” will be interpreted to allow an employer to refuse to reimburse expenditures for cellular telephone and/or data plans that an employee would have for personal use regardless of the need to also use the device and data plan for work.

Key Observations

Employers with employees in Illinois should review and update their expense reimbursement policies and practices in light of the new law. If no written expense reimbursement policy is in place, an employer should consider adopting one.

Having a well-constructed expense reimbursement policy is likely to be one of an employer’s best defenses 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 an employer to set reasonable limits on the amount it will reimburse for various expenses.

© 2020 Vedder PriceNational Law Review, Volume IX, Number 32

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About this Author

Thomas G. Hancuch, Employee Benefits Lawyer, Vedder Price law firm
Shareholder

Thomas G. Hancuch is a shareholder at Vedder Price where he represents employers in all aspects of employee benefits, labor and employment law. His practice focuses on employee benefit plan design and administration, benefit claims and litigation; employee relations and benefits aspects of mergers; acquisitions; workforce reductions and outsourcing; leaves of absence and accommodation of employees with disabilities; employment discrimination; harassment and retaliation claims; employee leasing and worker classification; executive compensation; wage and hour laws;...

312-609-7824
Fabian Limon Employment Attorney
Associate

Fabian Limon is an Associate in the Chicago office of Vedder Price and a member of the firm’s Executive Compensation and Employee Benefits practice group.

Mr. Limon counsels employers on all aspects of employee benefits law, focusing on retirement and welfare plan design; qualification and compliance; benefit claims and litigation; withdrawal liability and executive compensation. He also advises employers regarding benefit issues in connection with mergers and acquisitions and U.S. Department of Labor and Internal Revenue Service correction programs.

While in law school, Mr. Limon was an avid member of the trial and moot court team. He served on the executive board of the Latino Law Student Association and was a Teaching Assistant for legal writing courses.

He is fluent in Spanish and previously worked in the International Human Rights Clinic on refugee and asylum cases. Prior to joining Vedder Price, Mr. Limon served as a police officer with a suburban Chicago police department.

 

312-609-7972