Illinois Department of Labor Amends its Regulations Governing the State’s Business Expense Reimbursement Law

The Illinois Division of Labor (IDOL) has revealed amended laws, efficient April 14, 2023, to Illinois’ Wage Fee and Assortment Act (IWPCA).¹ The amended laws affect Illinois’ sturdy expense reimbursement necessities below the IWPCA. One of the vital essential new laws from the IDOL now requires employers to keep up their expense reimbursement data for 3 years. 

Part 9.5 of the IWPCA gives Illinois workers with expansive expense reimbursement protections. Particularly, workers are entitled to reimbursement of “essential expenditures and losses incurred by the worker throughout the worker’s scope of employment and straight associated to providers carried out for the employer.”² The IWPCA defines “essential expenditures” as all cheap expenditures required of the worker within the discharge of their employment and expenditures made to the first good thing about the employer.

The IDOL’s amended laws now present the next five-factor take a look at used to find out whether or not the worker’s expenditure was made to the first good thing about the employer:

1. Whether or not the worker has an expectation of reimbursement;
2. Whether or not the expense is required or essential to carry out the worker’s job duties;
3. Whether or not the employer is receiving a price that it might in any other case have to pay for;
4. How lengthy the employer is receiving the profit; and
5. Whether or not the expense is required of the job.

The IDOL specifies that no single issue is dispositive. As a substitute, this evaluation ought to deal with the extent to which the expense advantages the employer and its enterprise.

Regardless of this new five-factor take a look at, the amended laws fail to supply employers with steering on the definition and scope of whether or not a enterprise expenditure is “essential” or “cheap,” thus leaving Illinois employers with open questions as to how these phrases can be interpreted by the company or how an Illinois court docket would possibly interpret this regulation in apply. Thus far, there have been no substantive court docket selections decoding Part 9.5 of the IWPCA, and the amended laws don’t present the mandatory path to Illinois employers. For instance, the amended laws don’t deal with whether or not employers should reimburse a “cheap share” of the particular prices of a private cell system that an worker may be required to make use of for work (as courts in California have held below the California Labor Code).

Along with the adoption of this five-factor take a look at outlined above, the laws now require employers to keep up the next data for 3 years:

• All insurance policies relating to reimbursement;
• All worker requests for reimbursement;
• Documentation displaying approval or denial of reimbursement; and
• Documentation displaying precise reimbursement and supporting paperwork.

These recordkeeping necessities are significantly essential for employers because the amended laws now present workers the proper to file a declare towards the employer with the IDOL following a denial of or failure to answer a request for an expense reimbursement. The declare filed with the IDOL would search such reimbursement for the “cheap and essential” enterprise expense. Information of this sort will profit employers ought to they be confronted with defending an IDOL declare on this problem.

Whereas having an expense reimbursement coverage is preferrable, it doesn’t wholly absolve employers of potential legal responsibility to an worker for an expense reimbursement past the scope of the corporate’s coverage. An employer with an expense reimbursement coverage that implements its coverage by reimbursing its workers extra generously than is required below the coverage’s written phrases may very well bind itself to reimbursements past these specified within the coverage. Which means that employers might bind themselves by apply, not simply by nature of the coverage in place.

Lastly, employers must be aware that any worker reimbursements owed however not paid to the worker throughout the course of the worker’s employment shall be included within the remaining compensation owed to an worker on the finish of the worker’s employment.

Corporations with workers in Illinois ought to instantly assessment their office insurance policies to make sure compliance with the brand new amended laws. At a minimal, there must be a written coverage that specifies the forms of bills which might be “essential and cheap bills” and reimbursable, outlining the corporate’s document retention coverage, and the process for well timed submitting requests for expense reimbursement.