Several states have also enacted their own expense reimbursement laws that either meet or exceed the standard set forth in the FLSA. 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NY Because remote work employee stipends are taxable income, you must report them on their W-2s. 98% of respondents in Buffers 2023 Remote Work Survey of 3000 would like to work remotely for the rest of their careers (Buffer). To help employers, weve put together a chart listing which states have remote employee reimbursement laws and what expenses must be reimbursed. Employers must reimburse employees for all necessary expenses or losses. Understanding the state and local rules surrounding remote employee reimbursement can help your business avoid lawsuits by employees. Only authorized expenses by the employer must be reimbursed. Employers should consider reimbursing costs such as a reasonable percentage of use for things like home electricity, personal cell phones, printer paper, pens/pencils, etc. Get expert advice and helpful best practices so you can stay ahead of the latest HR trends. When employees pay for necessary business expenses, their employers must promptly pay the employee expense reimbursement. California and Illinois have the most robust and expansive business expense reimbursement laws. App. Contact us today so we can learn more about your business. Even if your organization is in a state where remote work reimbursements aren't required, it's still a good idea to have an expense reimbursement policy in place so that employees know the policy ahead of time. Save time, pay employees from wherever you are, and never worry about tax compliance. The employee can also ask the Labor Commissioner to cite the employer or anyone acting on the employers behalf under Labor Code Section 2802(d). By way of a recent amendment, the Illinois Wage Payment and Collection Act now requires employers with employees working in the State to reimburse their employees "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." A: Alaska, California, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New York, North Dakota, Pennsylvania, South Dakota, and Washington, DC all have enacted statutes which bear on expense reimbursement. Page Content These days, most employers can't keep pace with technology as nimbly as their workforce can. We do not necessarily advocate those approaches. Control costs and make every dollar count with reporting. https://casetext.com/regulation/district-of-columbia-administrative-code/title-7-employment-benefits/chapter-7-9-wage-hour-rules/rule-7-910-tools, https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2402&ChapterID=68, https://www.legis.iowa.gov/docs/code/91A.3.pdf, https://malegislature.gov/laws/generallaws/parti/titlexxi/chapter149/section148, https://www.revisor.mn.gov/statutes/cite/177.24, https://leg.mt.gov/bills/1995/mca/39/2/39-2-701.htm, https://casetext.com/statute/new-hampshire-revised-statutes/title-23-labor/chapter-275-protective-legislation/reimbursement-of-employee-expenses/section-27557-reimbursement-of-employee-expenses, https://newyork.public.law/laws/n.y._labor_law_section_198-c, https://casetext.com/statute/north-dakota-century-code/title-34-labor-and-employment/chapter-34-02-obligations-of-employer-and-employee/section-34-02-01-employer-must-indemnify-employee-for-losses-and-expenses-exception, https://sdlegislature.gov/Statutes/Codified_Laws/2077532, https://lni.wa.gov/workers-rights/wages/getting-paid/, http://www.seattle.gov/laborstandards/ordinances/wage-theft, https://www.reuters.com/legal/government/amazon-sued-over-employees-remote-work-costs-during-covid-19-pandemic-2022-03-25/. While there is some discretion the employer can exercise in determining the amount of reimbursement (such as actual expenses and the reasonableness of the employees choice: i.e., was the employee required to use their own phone), the following language by the court shows the standard is still reasonable reimbursement (which means if the issue went to court a judge or jury would determine reasonableness, which means an employer should be careful in this area). As a result, many businesses are adopting automated expense management systems, which has resulted in an increase in the use of third-party providers. The requirements of the Americans With Disabilities Act (ADA) may also alter employer reimbursement obligations. General Email: info@utilityproject.org Reimburse for the actual voice and/or data fees incurred for business purposes, which requires employees to submit expense reports itemizing the costs of calls made for work purposes and the costs of data used for work supported with cell phone bills or other evidence of the costs (this is a time intensive process for employees); Reimburse for a percentage of voice and/or data fees that accurately reflects the amount of mandatory business usage, and if a percentage or flat monthly amount is used, then allow employees to seek reimbursement for any additional costs incurred over the percentage or flat amount if the actual costs of business use exceed those amounts (this can be hard to determine given the number of different plans available); or. Other states (like Alaska and Arkansas) require reimbursement only if equipment purchased by employees for work-related purposes cannot be used during normal social activities of the employee or if the purchase/expense would bring the employees compensation below minimum wage. (8 Alaska Admin Code Section 15.165; Code of Arkansas Rules and Regs., 010-14-107(B).). Stay ahead of recruiting and hiring regulations. 1 0 obj Check out this guided tour to see for yourself how our platform works. Employees working from home instead of at the office often had to rely on their own equipment and internet instead of using the employer-provided tools they were used to. But work usage may vary depending on the position. Reduce risk, save time, and simplify compliance management. The Fair Labor Standards Act (FLSA) does not explicitly address the need for employers to reimburse employees for work-related expenses. Driver violation points At least ten states Illinois, California, Massachusetts, Montana, Pennsylvania, New York, New Hampshire, North Dakota, South Dakota, Iowa and the District of Columbia have enacted laws requiring employers to reimburse employees for certain remote work expenses. 10170 Necessary expenses include internet access and phone bills for remote workers. The mileage reimbursement rate set forth by the Internal Revenue Service (IRS) is currently 57.5 cents per mile as of 2019. 778.217 Reimbursement for expenses. While a remote work model has key benefits for employers and employees, there are additional considerations, such as costs for employees' laptops, printers, desks, postage, telephone and internet, and office supplies such as paper and ink. Reduce labor spend, manage overtime, and maximize productivity across your workforce. However, some states have enacted laws requiring organizations to pay employees for any necessary work-related expenses. Case law since Cochran has reinforced the rule that an employer must reimburse a reasonable amount without actually explaining how to calculate that amount. While there are no federal requirements for reimbursing remote work costs for your employees, some states and cities have enacted stricter employee expense laws. Otherwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee. Employee reimbursements are at the employers discretion. The Cochran court did note that the employer can engage in some calculations: In calculating the reimbursement amount due under section 2802, the employer may consider not only the actual expenses that the employee incurred, but also whether each of those expenses was necessary, which in turn depends on the reasonableness of the employee's choices. (Id. This blog article was originally published on March 23, 2022. Reimbursement is required even if the employee does not actually incur extra expenses as a result of his or her use. However, several states (including California, the District of Columbia, Illinois, Iowa, Massachusetts, Montana and New York) have specific state law requirements applicable to employee expense reimbursements. xZYoF~`Cc6 l`{s!qIdC3~^",G_}upn:o5[Q"G_}=~~dy3]+kXoslcnD;Ow]}E>=gvGqE.Y2_|-~`W;3j}LiG{&E};= r-~qN83r_QE;$IA*e% 'eU1{ aISsr]3Kd.(-zEf_c1b?\{yGoH+^QdaGIz)!%gg]rF0q= (c) For purposes of this section, the term necessary expenditures or losses shall include all reasonable costs, including, but not limited to, attorneys fees incurred by the employee enforcing the rights granted by this section. Federal law doesnt require employers to reimburse their employees for work expenses. The FLSA does not explicitly require an employer to reimburse its employees for business expenses or deductions. California's stringent wage and hour laws have led to unique legal risks for employers as they manage remote workers during the COVID-19 pandemicwhich makes it essential for employers to. 1144-1145.). Employers should also be aware of any potential reimbursement obligations under the FLSA or the obligations for employees working remotely as a reasonable accommodation under the ADA. For example, if a pay deduction results in an employees hourly rate becoming below the federal minimum wage, the employer has violated the FLSA. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. Once you understand your obligations, set clear guidelines for your employees. Other than those authorized by state or federal law, wage deductions generally require an employee's written authorization ( Iowa Code Ann. Our unparalleled expertise is coupled with an ability to provide a single point of contact for full-service, seamless employment support. Organizations learned to operate in this new environment almost overnight. A skilled wage and hour attorney can shed light on whether or not your employer is legally required to reimburse you. PHA+Q2hlY2sgeW91ciBpbmJveCBmb3IgYW4gZW1haWwgY29uZmlybWluZyB5b3VyIHN1YnNjcmlwdGlvbi4gRW5qb3khPC9wPg==, Remote Employee Reimbursement Rules by State, Massachusetts General Law Chapter 149, 148A, Paycors integrated expense management software, 5 Benefits of AI Talent Sourcing Technology for Recruiters, Get Our Customizable Employee Review Template, Boost Efficiency and Transform Your Workplace Culture with HR Technology, 10 Tips for Small Businesses Considering a Payroll Provider Switch, Onboard like a Pro: Tips for Successful Employee Integration, all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties., the cost of purchasing and maintaining any tools required of the employee in the performance of the business of the employer., all necessary expenditures or losses incurred by the employee within the employees scope of employment and directly related to services performed for the employer., Expenses by the employee which are authorized by the employer and incurred by the employee shall either be reimbursed in advance of expenditure or be reimbursed not later than thirty days after the employees submission of an expense claim.. In some cases, local jurisdictions such as cities and counties may impose their own rules regarding expense reimbursement. Even fewer states require reimbursement for remote work expenses. Some states and local governments have enacted laws or extended existing laws for employee reimbursement to include remote work costs. When the COVID-19 pandemic forced some businesses in the United States to move to remote work, many organizations didnt have a remote work policy or procedures in place. However, its important to exercise caution when selecting an integrated solution since employees and managers may need to learn a new system, resulting in additional effort and the possibility of mistakes. 2022), Guidelines for Accommodating Sincerely Held Religious Beliefs and Disabilities for Employers Mandating Vaccinations (Sept. 2021), Religious Beliefs in the Workplace Following the Supreme Courts Bostock Decision (Sept. 2021), The COVID-19 Employment Litigation Landscape Is It All Uphill From Here? The common practice that is evolving is to provide a flat monthly stipend and inform employees in writing that employees may submit expense reimbursement requests to the extent that the stipend does not otherwise cover their business internet and cell phone usage. Some say the safest approach is to pay the entire cost of an employees phone. Consequently, many workforces were thrust into remote work models without adequate time and resources to develop thoughtful remote work plans and fully contemplate the impact of the shift on their businesses. endobj Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee's cell phone bill. United States. An employer will want to maintain records as to reimbursements made to employees and the rationale behind those reimbursement amounts. As the pandemic continues, many employers are attempting to adapt to their workforce's new normal, which may include a continuation of their current remote model or the implementation of a hybrid work model. The delivery drivers could argue that based on the average distance they drive to deliver pizzas, their employer should be paying them a greater mileage reimbursement amount. Yes. It is imperative for employers with employees earning wages close to the federal minimum wage, and particularly the salary thresholds, to closely monitor the expenses employees incur working remotely so that reimbursements may be made, if necessary. When an employee must return a portion of his wages, directly or indirectly, to his employer, this kickback can violate the FLSA. Ensure you have a strong onboarding process. Section 2802; 820 Ill. Comp. Ann. %PDF-1.5 In 2021 and 2022, some employees sued their employers over unreimbursed remote work costs. Paycors always in the news for innovation, hiring and more. 1011 Camino Del Rio S, Suite 531 The California Court of Appeal agreed there were violations and held (which means, its now the law): We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. Its also important to determine your states tax rules regarding reimbursements and how they will impact your companys and your employees taxes. Learn more about offering an employee stipend for remote work. 2023), How to Navigate Ballooning Pay Disclosure Laws Across the US (Mar. 75 percent? But, employers should be sure to consider tax implications when considering the best route for their business. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. However, several states (including California, the District of Columbia, Illinois, Iowa, Massachusetts, Montana and New York) have specific state law requirements applicable to employee expense reimbursements. Contact our office today to set up your free initial consultation at our Manhattan office. To find out if you have a claim, send an online inquiry or call our law office at 917-639-5350 or toll free 1- 877-390-8732. You should note that if you do use a personal phone for business use, you may be able to record a trade or business expense for your personal tax reporting purposes. Click to view our complete suite of labor and employment video chats, Founded in 1949, Baker McKenzie advises many of the worlds most dynamic and successful business organizations through more than 4,100 locally qualified lawyers and 6,000 professional staff in 77 offices in 45 countries. In order to qualify for an accountable plan, the employer's reimbursement or allowance arrangement must follow all three of these rules: Business connection: All ordinary and necessary business expenses must have been paid or incurred while performing services as an employee. In many cases, employers have a legal duty to reimburse their employees for necessary business-related expenditures, such as: At Lipsky Lowe LLP, we can advise you as to the expenses youve personally incurred that your employer must reimburse. San Diego, CA, 92108 reimbursement obligations employers might not have had to think about before COVID-19. Remote-firstorganizations can make big savings on real estatebut are they required to instead pay for remote employees expenses? However, the court did not provide guidance as to what is meant by reasonable percentage. Does it mean 20 percent? Find quality candidates, communicate via text, and get powerful analytics. Review, reimburse, and report on employee expenses in one location. Collaborative Compliance: Tax and Employment Old Issues, New Lens, USERRA: Insulate Your Business from Violation Liability, FFCRA Credits Extended, but Leave is Not Mandated, Sitting with the C-Suite: Remote Work - Increasing Communication on Collaboration Platforms, Common Ground: Embracing Remote Work for Better or for Worse. Re: Request for Opinion . Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills. (Cochran v. Schwan's Home Services, Inc. (2014) 228 Cal. In the most employee-friendly state, California, employers may even be required to pay a portion of home utilities, such as air conditioning. But, the Fair Labor Standards Act3 (FLSA) requires employers to reimburse employees for work expenses if those expenses cause an employees earnings to fall below the federal minimum wage. Unfortunately, in the years after Cochran was decided, employers still dont have a good answer because the courts and government agencies have not provided specific guidance. The surcharge for all violations can be up to $93. 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