Step 2: Getting Started

As you continue to set up your team for the long road ahead, do you have a handle on what they need, and who pays for it? Today, let’s talk reimbursements.

Review Your Obligations, Check Your Promises

Employers should look at IRS regulations, their state and city laws, as well as their own policies (check the handbook) and contracts (check the employment agreement) and retrain supervisors on how to field reimbursement requests.

Draft a (Better) Policy

You may have a reimbursement policy; you may not. Either way, now is time to draft a good one. A policy can void an old version that just does not make sense now that the world is upside-down … just ensure that you do not retroactively apply it in violation of your wage and hour laws.

The following jurisdictions already have reimbursement laws in place:

  • California
  • Illinois
  • Iowa
  • Massachusetts
  • Montana
  • New York
  • Pennsylvania
  • Washington, DC

Your new policy must take care to focus on both your state laws and your business needs. Boilerplate language can spell financial disaster, especially where your state puts the onus on you to provide one or accept the consequences (a/k/a, the receipt) of a vague policy without parameters.

For example, in Illinois, employers must reimburse employees for “all necessary expenditures or losses incurred by the employee within the employee’s scope of employment and directly related to service performed for the employer.” This blanket mandate can be supplemented by a policy that complies with Illinois law while restricting spending.

However, those without a policy have little room to avoid an expense where an employee purchased an item for the office at the direction of a supervisor, for example. In contrast, employers who have a written policy, such as requiring pre-approval, can refuse to reimburse an employee who does not comply. Employers concerned about a lagging accounts payable can require employees to submit invoices and/or receipts relatively promptly, though no sooner than 30 days after the expenditure.

Budget!

Which tools do remote workers need more of? Which tools have they lost? Beware of costs that may grow with your remote workforce. For example, as we change how and where we work, employers should expect more employees to request reimbursement for their cell phones. After all, it is unlikely that they took their landline from the office when they “went home for the weekend” back in March. It stands to reason that many are using their cell phones for all work-related phone calls. California Labor Code section 2802 reads similarly to Illinois, and California courts have ruled that necessary expenditures include cell phones. Stating that the “purpose of this statute is ‘to prevent employers from passing their operating expenses on to their employees,’ ” the court in Cochran v. Schwan’s Home Service, Inc. held that it does not matter whether the employee has a plan with unlimited or limited minutes:

“Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job? The answer is that reimbursement is always required. Otherwise, the employer would receive a windfall because it would be passing its operating expenses onto the employee. Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill.”

Companies should expect to tackle sooner rather than later the challenge of determining what a reasonable percentage of an employee’s cell phone bill might look like, based on each employee’s role and usage. Additionally, if California precedent is a harbinger of things to come (spoiler alert: it always is), employers should expect that accounts on Zoom, Microsoft Teams, and other virtual platforms will be the employer’s to pay.  

So, like everything about this new world, remote work changes the landscape on reimbursement. It’s time to assess your policy, communicate any changes and budget for the future.

The bad news is that you may have to pay for things like cell phones, if they now serve as the office line. The good news is that your travel budget likely left you some wiggle room.  

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