IL: The Need for Expense Reimbursement Policies

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Peter Gillespie, Partner, Laner Muchin
May 15th, 2023

As employers in Illinois should recall, having a written expense reimbursement policy is a best practice based on changes to the Illinois Wage Payment and Collection Act that went into effect on January 1, 2019, and that require employers to reimburse employees for “necessary expenditures and losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.” Employees are permitted to pursue claims for unpaid expenses much in the same way as they can pursue claims for unpaid wages, meaning that significant interest penalties and fees can be tacked on to a claim for an unreimbursed expense that an employer may be legally required to pay.

The Illinois Department of Labor (“IDOL”) recently amended and significantly expanded its regulations governing employee expense reimbursements. Among other changes, IDOL requires that employers maintain expense-related records for three years, including:

  • All policies regarding reimbursement;

  • All employee requests for reimbursement;

  • Documentation showing approval or denial of reimbursement; and

  • Documentation showing actual reimbursement and supporting documents.

While written policies can protect employees from unexpected claims, employers that cannot satisfy their recordkeeping obligations may not receive the benefit of these protections. In addition, employees may be able to demonstrate that their expense requests that exceed a “cap” are valid if the employer previously deviated from its written policies.

Illinois employers still face many unanswered questions about thorny reimbursement issues, including expenses employees may effectively be covering costs for their employers in a “work from home” scenario or by using a personal electronic device. IDOL’s revised regulations do not resolve these ongoing concerns.

Based on IDOL regulatory changes, employer should carefully review existing expense reimbursement practices and adopt written policies that align with their practices. Employers can and should require employees to submit reimbursement requests promptly and in writing. Some employers may need to begin documenting when certain expenses will not be reimbursed and explaining the reason for the denial. Managers and supervisors should be trained on the applicable policy and instructed that the policy should be administered as written. Class action disputes over business expenses currently are not common in Illinois, but Illinois law makes it possibly prohibitively costly for an employer to fight over expense reimbursement claims.

Laner Muchin attorneys can assist in preparing policies and providing training to reduce the risk of a dispute.

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