Several states, the District of Columbia, and the city of Seattle have laws requiring organizations to provide their employees with reimbursement for any “necessary work-related expenses.”
Here's what you need to know about remote worker reimbursement:
- Employers might be surprised to know that there are laws on the books in certain states requiring that employers reimburse workers for business expenses.
- Generally, reimbursable expenses are those that benefit the employer.
- Many employers not required to cover business expenses elect to do so voluntarily.
One of the latest changes to the workplace is the rise of remote work. An example of one of the issues created by remote work is the question of who pays for the expenses. Employers might be surprised to know that there are laws on the books in certain states requiring employers to provide workers reimbursement for business expenses. Ignoring these laws could lead employers to compliance issues for remote work.
Federal law requires employee business expense reimbursement only in a narrow set of circumstances. However, several states, the District of Columbia, and the city of Seattle have laws requiring organizations to pay their employees for any “necessary work-related expenses.” In many instances, this can include the cost of:
- Home Internet access
- Cell phones
- Even utilities for home offices
Many employers not required to cover business expenses elect to do so voluntarily. However, employers should be careful that violating the terms of the agreement can lead to potential liability for breach of contract claims.
In general, federal law doesn’t require that employers reimburse employees for business expenses. However, the Fair Labor Standards Act (FLSA) requires employers to pay workers for business expenses when a worker’s compensation drops below the federal minimum wage.
California employers must reimburse employees for:
- “All necessary expenditures or losses incurred by the employee” while performing their job or
- While acting in “obedience to the directions of the employer.”
The Golden State law notes explicitly that “necessary expenditures or losses” includes all “reasonable costs.”
According to California-based employment law attorney Mark Spring, employers should expect to pay the “basic costs” of Internet usage, personal cell phones, laptops, and “some utilities” for remote workers.
Illinois uses language in its employee business expense reimbursement law similar to that found in California’s law. In Illinois, employers must reimburse employees for “necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.”
The cost of Internet access and phone bills, when used for remote work, are generally viewed as “necessary expenditures.”
While Illinois’ law is patterned after California’s law, there are differences. Employers can specify allowable amounts for the expenditures. Additionally, employees must submit requests for expense reimbursement within 30 calendar days of incurring the expense.
Iowa’s reimbursement statute discusses “authorized,” not “necessary” expenses and requires that employers pay employees within a specific timeframe.
Authorized employee business expenses must be reimbursed within 30 days. If the employer refuses to pay all or part of each claim, the employer must provide the employee with written justification for the refusal within 30 days.
Massachusetts law does not expressly require that remote work expenses be reimbursed. However, similar to the FLSA, employers cannot shift costs to employers that cause their earnings to fall below the minimum wage.
According to guidance by the Massachusetts Attorney General’s Office, “Employers should reimburse expenses that are “unavoidable and necessary” for employees to fulfill their job responsibilities.”
Legal experts say potential reimbursable costs could include the cost of a computer, the purchase or upgrade of home internet access, or the purchase or upgrade of cellular telephone service.
Minnesota requires reimbursement if employee expenses fall below the minimum wage. It also requires that the cost of specific equipment be reimbursed in full at the end of employment.
Montana’s employee business expense reimbursement law is similar to that of California’s and Illinois’. It requires that employers reimburse employees for all “necessary expenditures or losses” or “business expenses” incurred by the employee in direct consequence or discharge of their duties.
Under New Hampshire law, employers must reimburse employees for employment-related expenses unless:
- The costs are the type that are usually carried by the employee as a precondition of employment, or
- The employer pays for the expenses through wages, cash advances, etc.
Generally, reimbursable expenses are those that benefit the employer. Legal experts say such expenses “include mileage for the use of the employee’s vehicle for work purposes, costs for fuel or maintenance of the employer’s vehicles, replacement parts for the employer’s equipment, or costs incurred to protect the employer’s property, such as protective packaging for shipping employer-owned equipment.”
If there’s an agreement that outlines employee expense reimbursement, then New York employers must compensate employees within 30 days of the reimbursement becoming due, which is typically the date that the employee submitted the expense reimbursement request.
Employers must reimburse employees for business expenses or losses resulting from the “discharge of the employee’s duties” or the employee’s “obedience to the directions of the employer.”
In Pennsylvania, unreimbursed employee expenses are deductive under state personal income tax law.
Employers must reimburse all necessary expenses or losses the employee incurred while performing their duties or while obeying the employer’s direction.
State law does not require employee reimbursements; they’re at the employer’s discretion. Unreimbursed employee expenses may be tax-deductible. However, Seattle has an employee expense reimbursement requirement.
Employers must pay employees all compensation owed to them under the city’s wage theft law. Seattle law includes employer business expenses in the definition of compensation.
Employers must reimburse the purchase and maintenance costs of tools that the employer requires to perform work.