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The Latest Law in Illinois for Reimbursing Employees as of 1/1/19

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Introducing New Reimbursement Laws for Employees in Illinois

Are you an employer who requires her employees to buy their own uniforms? Or are you an employee who uses his personal cell phone for work purposes? Well, as of January 1, 2019, that all changes. Illinois amended the Illinois Wage Payment and Employment Act to now require that employers 'reimburse an employee for 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.' See 820 ILCS 115/9.5. 'Necessary expenditures' means '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.'

An employer is not responsible for reimbursing the following:

  • an employee's negligence;
  • normal wear; or
  • theft, unless the theft was a result of the employer's negligence

Although the statute now requires reimbursement for these expenses, I would advise my clients to write up a reimbursement policy as it would help protect them in the event an employee tries to accuse the employer of not reimbursing expenses. A written policy could also help fill in the gaps of the statute because, unfortunately, this amendment leaves some questions unanswered. For example, how does an employer 'authorize' and expense? What if an item incurs both personal and professional cost (such as cell phone or laptop?). Also, the statute prohibits employees from taking action against the employer if the employee did not follow the employer's guidelines.

California Law Can Help

California has a similar law so where Illinois law is undeveloped, it may be helpful to look to California for some guidance. Specifically, employers may be unsure as how to interpret 'necessary expenditures' when it comes to deciding which expenses to reimburse. As raised above, what if the employee is already paying for a cell phone and it does not cost the employee extra to use it to carry out her duties such as if there is an unlimited plan? Must the employee reimburse? This very question was raised in a 2014 California case Cochran v. Schwan's Home Service, Inc.,228 Cal. App. 4th 1137 (2014). In Cochran the plaintiff's filed a class action lawsuit against their employer because they were not compensated for using their personal cell phone data to make work-related calls. Initially, the court agreed with employer's argument that because employees have 'unlimited data plans for which they do not actually incur an additional expense when they use their cell phone,' the employer does not have to reimburse. The court of appeals reversed and strictly followed the standard that the employer requiring the employee to use the personal item was enough to require employee reimbursement. The question as to what losses the employee incurred is not relevant. In other words, even if the employee did not pay an extra penny to use the cell phone for work purposes, the employer is still liable. The angle that is taken is that not that the employee 'is not losing' but rather that the employer is passing its overhead to the employee. If an employer takes the latter framework, it is easier to determine whether that cost should be reimbursed to employee.

What Happens if Employers Don't Reimburse?

Because this statute is part of the Illinois Wage Act, the failed reimbursements are considered unpaid wages. Therefore, the penalties are the same. Under the Illinois Wage Act, when an employer fails to pay wages to employees, the employee can sue the employer for the unpaid ages, 2% of the amount of any such underpayments for each month following the date of payment during which such underpayments remain unpaid, and attorneys' fees. Additionally, the employer may be liable for a misdemeanor.

What Employers Should Do

Employers should always be mindful of changing laws and updating their contracts and policies accordingly. Employers should carefully review their reimbursement policies and handbooks. If an employer does not have a policy, the employer should draft one (or better, hire an attorney to do so!). If an employee uses his personal vehicle to drive for work-related purposes, uses his cell phone or a laptop to work, has a uniform, or any other business-related expense, employers should immediately implement a policy to reimburse for those. Additionally, employers can do the following to protect themselves:

  • Employers should add to their policies rules about using personal belongings for work related purposes,
  • Employers should discuss with their employees what personal belongings are being used for work and to what extent,
  • Employers should state what documents employers require for employee reimbursement,
  • Employers should clearly outline the process and timeline for reimbursement, and
  • Employers should indicate where to direct any questions about reimbursement.

Our firm is experienced in drafting employee handbooks and litigating wage claims and other business-related matters. Contact us to schedule a consultation.

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