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May 2023: Illinois Amends Business Expense Reimbursement Law

17 May


Update Applicable to:

All employers.

What happened?

Last month, the Illinois Department of Labor (“IDOL”) fairly quietly released amended regulations affecting the interpretation and enforcement of the Illinois Wage Payment and Collection Act (“IWPCA”). A complete listing of the amendments appears on the Illinois Secretary of State website. (Starting at p.5406 of document/p.102 of pdf). The effective date is April 14, 2023.

What are the details?

While Illinois employers have been required to reimburse employees for business expenses since 2019, the statute was brief, and the Illinois Department of Labor (IDOL) had not provided any illuminating guidance. The IDOL’s amended regulations now provide the following five-factor test used to determine whether the employee’s expenditure was made to the primary benefit of the employer:

  1. Whether the employee has an expectation of reimbursement;
  2. Whether the expense is required or necessary to perform the employee’s job duties;
  3. Whether the employer is receiving a value that it would otherwise need to pay for;
  4. How long the employer is receiving the benefit; and
  5. Whether the expense is required of the job.

The IDOL specifies that no single factor is dispositive. Because this is a factors or balancing test, employers should look at the answers as a whole. Just because the answer to one or more is “no” doesn’t mean an employer can rule out reimbursement. This analysis should focus on the extent to which the expense benefits the employer and its business.

In addition to the adoption of this five-factor test outlined above, the regulations now require employers to maintain the following records for three years:

  • All policies regarding reimbursement;
  • All employee requests for reimbursement;
  • Documentation showing approval or denial of reimbursement; and
  • Documentation showing actual reimbursement and supporting documents.

Employers should also be mindful that any employee reimbursements owed but not paid to the employee during the course of the employee’s employment shall be included in the final compensation owed to an employee at the end of the employee’s employment. Making unreimbursed expenses part of their final pay creates both a payment deadline and employer liability under the wage payment law.

For more information, please see the links below:

Illinois’ Wage Payment and Collection Act (IWPCA)

Reimbursement of Employee Expenses (820 ILCS 115/9.5)

Law Firm Summaries/Opinions: Article 1; Article 2

What do employers need to do?

Companies with employees in Illinois should immediately review their workplace policies to ensure compliance with the new amended regulations. At a minimum, there should be a written policy that specifies the types of expenses that are “necessary and reasonable expenses” and reimbursable, outlining the company’s record retention policy, and the procedure for timely submitting requests for expense reimbursement. Ultimately, these new regulations invite nearly as many questions as they answer. Until there is more clarity, employers should contact experienced labor and employment counsel for guidance on best practices for navigating these new regulations.

Need help understanding how changes to employment laws will affect your business?

Learn more about how Vensure's Illinois PEO services can help you navigate complex employment laws and keep your business compliant.

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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