Are You Ready For The New Illinois Expense Reimbursement Law?

Ahh, the holidays. Time to think about presents, office parties, family gatherings, or perhaps just a glass of eggnog. New employment policies? Probably not a topic on your mind. However, for many Illinois business owners, managers and HR professionals, it could be worthwhile to spend some time before the end of the year developing a new policy for their companies.

Effective on January 1, 2019, a new provision of the Illinois Wage Payment and Collection Act ("WPCA") will come into force. Through this new law, Illinois will join California and a few other states in mandating that employers reimburse employees for work expenses. The law provides that employers must repay “all necessary expenditures or losses incurred by an employee within the scope of the employee’s employment and directly related to services performed for the employer.” This language covers any reasonable expenses or losses paid by an employee as part of his or her job duties, so long as the primary benefit of the expenses or losses is to the employer. Employers will not be required to repay expenditures that are caused by an employee’s own wrongdoing or negligence, normal wear and tear or theft, unless the employer is itself negligent. The law specifies that so long as an employee submits a request for reimbursement, along with appropriate supporting documents (or the employee’s signed statement if no receipts were issued or if receipts were lost) within thirty days of incurring the expense, the employer has a duty to reimburse the employee.

So why should you be thinking about a new employment policy? The law creates a partial exemption for employers who adopt reimbursement policies. So long as a policy does more than offer nominal reimbursement, employers can impose the guidelines and specifications they deem appropriate. For example, an employer seeking to avoid excessive hotel, car or meal reimbursement requests may want to set a per diem maximum cost. If an employee fails to follow the requirements of an employer’s reimbursement policy, an employer can decline the reimbursement request unless it is shown that the employer has not followed its own policy or if the employer orders or authorizes the employee to incur the expense. At the same time, employers should do all they can to avoid WPCA liability. Under that law, not only do violators have to reimburse the expense, they also have to pay the claimant’s attorney’s fees and a two percent per month penalty running from the date that reimbursement should have been made. Do you want to take the chance that a court could find an employee's first-class airfare to be "reasonable" given the potential sanctions under the WPCA? 

Therefore, the question for every Illinois employer is how much control it wants to have over the new reimbursement obligation. By acting now, your business can minimize the risks of a future repayment request being evaluated under the default state standards and exposure to the substantial penalties imposed under the WPCA.