Employee Expense Reimbursement and Remote Working Policies

March 20, 2020

With COVID-19 forcing many business owners to implement remote working polices, it is important for employers to be aware of their liability for employee expenses while their employees work from home. In short, employers are responsible for reimbursing employees for all expenses directly incurred by the employee while performing services for the employer.

In  2018, Illinois amended the Illinois Wage Payment and Collection Act (“Act”) to include the requirement that employers must reimburse their employees for all expenses within the scope of “necessary expenditures incurred by the employee within the employee’s scope of employment and directly related to services performed for  the employer.” The amendment 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. 820 ILCS 115/9.5.

However, the Act permits employers to maintain written expense reimbursement policies that reimburse employees for less than the full cost of the expenditure. Put simply, employers may maintain policies that reimburse employees for less than 100% of the expenditure amount so long as the employer provides some reimbursement and the reimbursement is more than “de minimis.” Illinois courts have adopted a “reasonable percentage” formula to address situations of shared resources, like cell phones and home internet.

Considering the unprecedented nature of COVID-19, and the Illinois legislature has not defined what constitutes a “reasonable percentage,” employers should error on the side of overcompensating employees when shared resources are involved in order to avoid litigation. For example, if an employee will be required to work from home for an extended period of time and use their personal cell phones, home internet, offices, etc. as the primary means of communication to perform services for their employer, employers should reimburse employees for at least 50% of the cost (“Shared Resources”). Shared Resources are distinguishable from mandatory resources like monitors and headsets which an employee has no personal use for but is mandatory for providing services to the employer (“Mandatory Resources”).

In summary, employers seeking to implement work-from-home polices in light of COVID-19 pandemic should consider including the following in their policies:

  • Distinguish between Shared Resources like cell phones and home internet and Mandatory Resources like headsets and monitors.
  • Employers should purchase Mandatory Resources or provide expense limits in their reimbursement policies.
  • Employers should reimburse for Shared Resources at least 50% for items like cell phone and home internet.
  • Reimbursement policies should clearly define authorized and required Shared Resources and require preapproval for all other expenses.