Reimbursing for Business Expenses?

QUESTION: DOES YOUR BUSINESS NEED TO REIMBURSE EMPLOYEES FOR ALL BUSINESS-RELATED EXPENSES?

At the federal level there is no clear requirement that employers must reimburse employees for all of their out-of-pocket business expenses incurred in work related travel. However, where the expense incurred by the employee inures solely the benefit of the company and such expense takes the employee’s total weekly compensation below the federal minimum wage, there is risk that a minimum wage violation has occurred.   

Several states have also stepped into this area. For example, Illinois recently amended its state law to now require employers to reimburse all “necessary expenditures…incurred by the employee within the employee’s scope of employment and directly related to services performed by the employer.”  But Illinois is not alone, California, Montana, and Massachusetts also have state laws or guidance requiring employers to generally reimburse employees for expenses incurred within the scope of their employment. 

Of course, the devil is in the details and employers need to familiarize themselves with state laws (or ask legal counsel like Thompson Coe for guidance!).  Some states might allow employers to establish parameters or a process that employees need to follow in order to be entitled to reimbursement, while others might not.  Even in states that don’t have direct guidance on reimbursements, there may be a legal requirement that employers reimburse employees for incurred business-related expenses under contract principles. 

In short, there is a lot employers need to understand about the law and the circumstances of employee-incurred business-related expenses.  An employer’s best practice is to craft policies that employees will easily understand, know what type of expenses will be reimbursed, and what the reimbursement limitations are.  

Questions on reimbursement policies or expenses?  Contact your Thompson Coe attorney or myHRgenius at (651) 389-5007 or www.thompsoncoe.com.  For more information about the myHRgenius program go to www.myhrgenius.co.

Thompson Coe and myHRgenius Tip of the Week is not intended as a solicitation, does not constitute legal advice, and does not establish an attorney-client relationship.