by Maureen Anichini Lemon (Summer 2019)
A recent amendment to the Illinois Wage Payment and Collection Act (WPCA) requires Illinois employers to reimburse an employee for all expenditures or losses incurred by the employee within the scope of their employment that were authorized or required by the employer. (820 ILCS 115/9.5) Section 9.5 was added to the WPCA on January 1, 2019. Since that date, employers must reimburse employees for “necessary expenditures,” defined as reasonable expenditures or losses required in the discharge of an employee’s employment duties and that inure to the primary benefit of the employer.
It is common for employers to reimburse employees at the IRS-approved mileage rate for driving their own vehicle for work. Similarly, we can expect that the new law will require employers to reimburse employees for other personal expenses. Do you require an employee to use their personal cell phone or purchase a uniform for work? Chances are you will now be required to reimburse the employee for those personal expenses, or at least for the reasonable percentage of the cost of those personal items.
This new law supplements the requirements of the Local Government Travel Expense Control Act (ECA). That law, enacted in January 2017, requires all Illinois local public agencies, including school districts, to regulate the reimbursement of all travel, meal and lodging expenses of officers and employees. School districts have met the requirements of the ECA by adopting a resolution establishing the maximum allowable reimbursement for travel, meal, and lodging expenses.
The recent WPCA amendment applies to all types of expenses, not merely to those related to travel. The law exempts the following from reimbursement: (1) expenditures not authorized by the employer, (2) losses due to an employee’s own negligence, (3) losses due to normal wear, and (4) losses due to theft unless the theft was a result of the employer’s negligence.
Because it is a part of the WPCA, an employer who fails to reimburse an employee for necessary expenditures will be subject to the WPCA’s penalties, including attorney’s fees and liquidated damages.
To assist with compliance, each employer should adopt a written expense reimbursement policy. Employees must comply with that policy to be reimbursed. One component of the policy should be the timeframe in which an employee must submit documentation for reimbursement. The WPCA obligates employees to submit necessary expenditures, with appropriate documentation, within 30 calendars days after incurring the expense unless the employer’s policy allows additional time (i.e., 60 calendar days). The policy should notify employees that if their supporting documentation does not exist, is missing, or is lost, the employee must submit a signed statement regarding such receipts in order to be reimbursed.
The Illinois Department of Labor has not yet developed rules implementing the new Section 9.5. For the time being, we do not know how that agency or Illinois courts will interpret Section 9.5’s requirements. However, other states have interpreted similar language to include such expenses as personal computers and personal cell phones used to benefit the employer.
In Cochran v. Schwan’s Home Service, Inc., 228 Cal. App. 4th 1137 (2014), a California Appellate Court ruled that an employer must reimburse an employee for using a personal cell phone for work-related calls. The employee who brought the lawsuit had an unlimited phone/data plan. Because the employee incurred no additional costs due to the work-related calls, the employer argued that there were no marginal costs to be reimbursed. While the trial court had agreed with this argument, the appellate court did not. Believing that an employer would receive a windfall by passing its operating expenses on to the employee, the appellate court ruled that an employer must always reimburse an employee ‘a reasonable percentage of the employee’s cell phone bill’ for the mandatory use of a personal cell phone.
California courts have held that an employer’s obligation to reimburse an employee pursuant to a statute comparable to the WPCA’s new Section 9.5 extends to personal cell phones, internet expenses, personal laptops, tablets and printers. While it remains to be seen whether Illinois courts will follow California’s lead, Illinois employers should update their expense reimbursement policies to clarify:
- What personal items/equipment an employee may/may not use in the scope of employment;
- What expenses are reimbursable and at what amount;
- What documentation must be submitted and what to do if the documentation is unavailable; and
- When documentation must be submitted
Please contact an attorney at Ottosen Britz to assist with your policy review and revision.