Illinois Business Expense Reimbursement Law Now in Effect

The Illinois Legislature recently amended the state's Wage Payment and Collection Act to require that employers reimburse employees for all reasonable "necessary expenses" that are "directly related to services performed for [the] employer" and incurred primarily for the benefit of the employer.  The governor signed the law, which took effect Jan. 1. Illinois is now the ninth jurisdiction to impose expense reimbursement requirements on employers.

Under the new law, for necessary expenses to be reimbursable:

• The employer must have authorized or required" the employee to incur the expense.
  
• The expense reimbursement request must be submitted to the employer in writing within 30 calendar days of the date the expense was incurred, with appropriate documentation proving the expense (e.g., receipts). An employee may provide a signed statement regarding the expense in lieu of a receipt when supporting documentation has been lost or does not exist.
  

The new Illinois expense reimbursement obligation is patterned after a nearly identical requirement in California. One difference from the California obligation is that the new expense reimbursement law in Illinois allows employers to establish written expense reimbursement policies specifying the permissible amounts for expenditures along with other requirements for reimbursement. 

When an employer maintains "an established written expense reimbursement policy" with guidelines or specifications for necessary expenses that complies with the law, an employer is not liable for expense reimbursements that violate the policy or that exceed the policy's permitted expenditure amounts, "so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement."

Although Illinois employers must wait and see how courts interpret the new law, court decisions from California interpreting nearly identical language are instructive. Reimbursable expenses include traditional business-related expenses like transportation and travel expenses, business meals and entertainment expenses.  

However, California courts have consistently held that employers must also reimburse employees for business-related expenses related to use of their personal cell phones or other devices regardless of the marginal or nonexistent cost to employees. So, even where employees have personal unlimited phone/data plans and incur no additional expenses by using their personal devices for work purposes, California courts have required employers to reimburse a reasonable percentage of these expenses if employees must use these devices in performing services related to their employment and primarily for the benefit of the employer. 

Because of this potential liability, employers may want to consider addressing this issue in a written policy. The Illinois statute may allow employers a better opportunity to manage this type of expense than the courts have allowed companies with employees in California. 

Companies with employees in Illinois should immediately review their workplace policies with their employment counsel to ensure compliance with the new expense reimbursement law and that those policies take full advantage of the right under the Illinois statute to limit reimbursement of certain expenses. At a minimum, there should be a written policy that specifies the types of expenses that are "necessary expenses" and reimbursable, how expenses related to personal device will be reimbursed (e.g., will the employer use a flat/fixed amount across the board or will it reimburse a proportionate amount of the expense?), and the procedure for timely submitting requests for expense reimbursement.

Ines Monte is an attorney with Littler in Chicago. © 2019 Littler. All rights reserved. Reposted with permission.