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Navigating Illinois' New Expense Reimbursement Regulations

Recently, the Illinois Department of Labor (IDOL) implemented amended regulations to the
Wage Payment and Collection Act (IWPCA), specifically targeting expense reimbursement requirements. These new regulations introduce changes that impact employers' obligations and record-keeping practices. Understanding these amendments is crucial for Illinois employers seeking compliance and clarity in their expense reimbursement policies. Let's delve into the key aspects of the amended regulations and explore their implications.

illinois expense reimbursement regulations


Expanding Employee Reimbursement Protections

Section 9.5 of the IWPCA establishes comprehensive expense reimbursement protections for Illinois employees. It mandates reimbursement for necessary expenditures and losses incurred within the scope of employment, directly related to services performed for the employer. "Necessary expenditures" encompass reasonable expenses required for discharging employment duties and those primarily benefiting the employer.

The Five-Factor Test

The IDOL's amended regulations introduce a five-factor test to determine whether an employee's expenditure benefits the employer. Factors include the employee's expectation of reimbursement, the necessity of the expense for performing job duties, the value received by the employer, the duration of the benefit, and whether the expense is job-related. While no single factor is decisive, the analysis centers on assessing the extent of the expense's benefit to the employer and its business.


Lack of Clarity on "Necessary" and "Reasonable" Expenditures

Despite the introduction of the five-factor test, the amended regulations fail to provide explicit guidance on the interpretation of "necessary" and "reasonable" expenditures. This ambiguity leaves employers uncertain about how these terms will be understood by the agency or interpreted in Illinois courts. Employers seek clarity on issues like reimbursing a reasonable percentage of personal mobile device costs, a matter addressed in California labor laws but left unaddressed in Illinois.


Recordkeeping Requirements

To comply with the amended regulations, employers must maintain
specific records related to expense reimbursement for a period of three years. This includes policies
regarding reimbursement, employee reimbursement requests, documentation of approval or denial,
and evidence of actual reimbursement with supporting documents. These recordkeeping obligations are essential, as employees now have the right to file claims with the IDOL in cases of denial or failure to respond to reimbursement requests.

Importance of Clear Expense Reimbursement Policies

While having an expense reimbursement policy is advantageous, employers must understand that their practices may bind them to reimbursements beyond the policy's written terms. Implementing a written policy that defines "necessary and reasonable expenses" eligible for reimbursement, outlining record retention procedures, and establishing a process for timely reimbursement requests is essential for compliance and minimizing liability.


Final Compensation Considerations

Employers should note that any reimbursements owed to employees but not paid during their employment must be included in the final compensation provided at the end of their tenure.

With the implementation of amended expense reimbursement regulations in Illinois,
employers must review their policies and practices promptly. Ensuring compliance with the new
regulations, having a well-defined expense reimbursement policy, and maintaining proper records are crucial steps toward mitigating potential liabilities. By adhering to these guidelines, employers can navigate the regulatory landscape and demonstrate their commitment to fair and appropriate expense reimbursement practices in Illinois.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.