As of January 1, 2019, Illinois will have one of the most expansive employee expense reimbursement laws in the country. Governor Bruce Rauner recently signed off on an amendment to the Illinois Wage Payment and Collection Act, requiring employers to reimburse “all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.” 820 ILCS 115/9.5(a). Exceptions to this requirement include expenses or losses related to the employee’s own negligence, losses attributable to normal wear, and loses due to theft—unless the theft occurred as a result of the employer’s negligence.
While the amendment makes clear that reimbursement is the law, it is less clear on what is covered. For example, 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.” This circular definition leaves a lot of ambiguity as to what is “reasonable” and what expenses would come about primarily for the employer’s benefit.
California’s expense reimbursement law (California Labor Code Section 2802) is similarly‑worded to the new Illinois law and has generated some case law that might provide some insight into how Illinois’ law likely will be interpreted. California case law addresses issues such as appropriate methods to calculate reimbursable expenses arising from work-related uses of personal vehicles and cell phones; whether and when trainings and certifications are reimbursable; and when tort liability is a loss incurred in the discharge of duties.
In contrast to California’s law, Illinois’ new law gives more control and flexibility to the employer, to establish written expense reimbursement policies and procedures that specify the amount and requirements of any such reimbursements. For instance, unlike California, Illinois employers are not required to reimburse an expense if an employer has “an established written reimbursement policy” and the employee fails to comply with the policy. In addition, under the new Illinois law, the employee is required to submit documentation within 30 days after incurring the expense, but the employer may extend that deadline through written policy. As a final example, Illinois’ expense reimbursement law states, “[a]n employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure, or the employer failed to comply with its own written expense reimbursement policy.”
The bottom line: the best way for Illinois employers to prepare for the new expense reimbursement law is to take stock of their current reimbursement policies, and ensure such policies are: (1) in compliance with the new law; and (2) in writing, and clearly set forth what expenses are authorized, the amounts that are authorized, and any requirements for reimbursement.