Illinois: Amended Regulations Governing State Business Expense Reimbursement Law

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APPLIES TO

Employers with Employees in IL

EFFECTIVE

April 14, 2023

  

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Quick Look

  • IDOL amended the IWPCA to include a five-factor test used to determine an employee’s entitlement to expense reimbursement.

Discussion

The Illinois Department of Labor (IDOL) published amended regulations to Illinois’ Wage Payment and Collection Act (IWPCA) that significantly impact expense reimbursement requirements under IWPCA. The regulations took effect on April 14, 2023.

Under Section 9.5 of the IWPCA, Illinois employees are entitled to reimbursement of “necessary expenditures and losses incurred by the employee within the employee’s scope of employment and directly related to services performed for the employer.” The IWPCA defines a “necessary expenditure” as all reasonable expenditures required of the employee in the discharge of their employment and expenditures made to the primary benefit of the employer.

The amended regulations set forth a five-factor test used to determine whether the employee’s expenditure was made to the primary benefit of the employer. Specifically, the test looks at: (1) whether the employee has an expectation of reimbursement; (2) whether the expense is required or necessary to perform the employee’s job duties; (3) whether the employer is receiving a value that it would otherwise need to pay for; (4) how long the employer is receiving the benefit; and (5) whether the expense is required of the job. The IDOL has specified that no single factor is determinative, and the analysis should focus on the extent to which the expense benefits the employer and its business. However, the amended regulations do not contain guidance on the definition or scope of whether a business expenditure is “necessary” or “reasonable,” under the five-factor test.

In addition, the amended regulations now require employers to maintain certain records for a period of three (3) years. These include: (1) all policies regarding reimbursement; (2) all employee requests for reimbursement; (3) documentation showing approval or denial of reimbursement; and (4) documentation showing actual reimbursement and supporting documentation.

Significantly, the amended regulations also provide employees with the right to file a claim against the employer with the IDOL following a denial or failure to respond to a request for an expense reimbursement, therefore the updated record retention requirements are of significant importance to employers who find themselves facing such claims. Employers should be mindful that employee reimbursements owed but not paid to the employee during the course of employment must be included in the final compensation owed to an employee at the end of their employment.

 

Action Items

  1. Review expense reimbursement policies for compliance.
  2. Update record retention policies and procedures.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase