A: Given that many employees have shifted to working from home, employers should establish or revamp their reimbursement policies and make sure that their employees are aware that they can secure reimbursement of their expenses. Re: Request for Opinion . <> 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. Legal analysis to be used to determine if evidence supports a claim of retaliation. 1144.). Build a Morning News Brief: Easy, No Clutter, Free! Organizations learned to operate in this new environment almost overnight. Android, iPhone, etc. 5. https://casetext.com/regulation/district-of-columbia-administrative-code/title-7-employment-benefits/chapter-7-9-wage-hour-rules/rule-7-910-tools, 6. https://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2402&ChapterID=68, 7. https://www.legis.iowa.gov/docs/code/91A.3.pdf, 8. https://malegislature.gov/laws/generallaws/parti/titlexxi/chapter149/section148, 9. https://www.revisor.mn.gov/statutes/cite/177.24, 10. https://leg.mt.gov/bills/1995/mca/39/2/39-2-701.htm, 11. 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, 12. https://newyork.public.law/laws/n.y._labor_law_section_198-c, 13. 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, 14. https://sdlegislature.gov/Statutes/Codified_Laws/2077532, 15. https://lni.wa.gov/workers-rights/wages/getting-paid/, 16. http://www.seattle.gov/laborstandards/ordinances/wage-theft, 17. https://www.reuters.com/legal/government/amazon-sued-over-employees-remote-work-costs-during-covid-19-pandemic-2022-03-25/. 2023), The FTCs Proposed Rule on Non-Competes: What Employers Need to Know (Jan 2023), Employer WARN-ing: Notice Requirements to Know Before Layoffs (Jan. 2023), Employers: All Eyes on Salary and Pay Range Disclosure in US Job Postings (Dec. 2022), Cost-Cutting Considerations in the Workforce Without Layoffs (Nov. 2022), AI in Recruitment and Hiring: Checking Your Blind Spots (Oct. 2022), Labor Unions and the Workforce: Whats Trending and How to Get Out in Front (Aug. 2022), The Proliferation of Pay Transparency Laws: What US Employers Need to Know (May 2022), US, UK and EU Whistleblower Developments for Multinational Employers (Apr. However, there's still quite a bit of a gray area in other states. For example, employees may now (and for the foreseeable future) be incurring expenses related to printer paper, pencils, pens, cell phone expenses, home internet bills, etc. 4. Generally, businesses arent required to pay expenses when workerschooseto work remotely. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Theres never been a better time to join. Similar to California's law, the Illinois law has also been interpreted to require reimbursement for cell phone and internet expenses when employees are required to use their cell phones or internet for work purposes in addition to equipment such as routers, laptops, and printers. Learn more about our product bundles, cost per employee, plans and pricing. Connect with new hires and make a lasting first impression. In this case, it is also recommended that you develop general guidelines around reimbursement to avoid confusion or unequal application. Attract top talent, develop employees, and make better decisions with actionable data. 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. With a remote work stipend, you can offer your employees a monthly allowance for their home office costs. Our unparalleled expertise is coupled with an ability to provide a single point of contact for full-service, seamless employment support. Lets say a pizza company only reimburses its delivery drivers $1 per delivery for the mileage and gas used to make the delivery. What may be reasonable in one instance might not be in another. 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Stay ahead of recruiting and hiring regulations. If you have employees working remotely in different states, you can outline the differences in how you'll reimburse their work from home expenses in your expense policy. (Cal. Otherwise, the employer would receive a windfall because it would be passing its operating expenses on to the employee. Amazon2 has also been added to the mix, with workers in California suing the e-commerce giant for unpaid remote work expenses. Claim hiring tax credits and optimize shift coverage. Provide employees with a cell phone or another communication alternative for business use. Maximize training and development with personalized content. With the WorkPerks employee stipend administration platform from PeopleKeep, you can create a quality remote employee benefits package that works for everyone. Supplement Payments (Labor Law 198-c) Interestingly, this law has been interpreted to require employers to reimburse employees for a reasonable percentage of their monthly internet or mobile telephone bill for work-related uses, even. Does your employer fail to compensate you for other regular expenses? However, ten states (and Washington D.C.) currently have laws requiring employers to reimburse employees for certain remote work expenses: California, Washington D.C., Illinois, Iowa, Massachusetts, Minnesota, Montana, Hampshire, New York, North Dakota, Pennsylvania, and South Dakota. Hire skilled nurses and manage PBJ reporting. According to state law, necessary expenditures include all reasonable costs. Lab. Our employment law attorneys offer free initial consultations about expense reimbursement. Washington State Department of Labor & Industries15. endobj Control costs and mitigate risk with accurate timekeeping. Paycor delivers deep product functionality, standard integrations, and certified expertise in sales and service to meet the needs of the industries and organizations we serve. 10170 A: No, an employer is not typically required to reimburse an employee for business-related expenses when they are neither required nor encouraged to work from home. Representation in business, real estate, construction, home care, trust and probate litigation and general civil litigation. 4th 1137 (2014). We help you stay updated on the latest payroll and tax regulations. Illinois Wage Payment and Collection Act, Section 9.5: Reimbursement of employee expenses6. App. have one or more wireless communications customers in New York State. who were not reimbursed for expenses pertaining to the work-related use of their personal cell phones, alleging labor code violations and unfair business practices, and seeking declaratory relief and statutory penalties. This will help combat employees sitting on reimbursement requests for months or years, but ultimately the deadline to submit a reimbursement request will depend on state specific laws where they exist. Soon, employees wondered who should be responsible for the expenses theyd accumulated for remote work. Employers must provide reimbursements to employees for expenses if there's an agreement, such as an employment contract, that outlines expense reimbursement. 2023), How to Navigate Ballooning Pay Disclosure Laws Across the US (Mar. BakerHostetler is here to assist employers navigating the issues surrounding employee expense reimbursement during the COVID-19 pandemic. For help crafting your expense reimbursement policy, please contact your Baker McKenzie employment lawyer. Ensure you have a strong onboarding process. Employees often use their personal resources to pay for expenses necessary to carry out their employment. Return unsubstantiated amounts: Any excess reimbursements or allowances must be returned within a reasonable time (120 days). Generally, reasonable reimbursable expenses will likely include: The employee who prefers the convenience of a standing desk, a wireless computer mouse, or an ergonomic chair will likely foot the bill for these expenses, as such items are generally not deemed reasonable or necessary, absent an employer's legal requirement to provide them. If an employer knows that an employee will regularly incur a certain business-related/work-related expense, it can choose to increase that employees salary to cover the costs of those expenses. 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. Until more guidance is provided from the courts or a government agency, the employer should carefully monitor its practice and make sure it has a policy of reasonable reimbursement and fully address any employees grumbling about fair reimbursement. 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. Reduce risk, save time, and simplify compliance management. Schwan's Home Service, 228 Cal. Employers and employees frequently inquire about whether an employer must reimburse an employee when the employee uses their personal cell phone for the employers business? Reduce labor spend, manage overtime, and maximize productivity across your workforce. We collect no fees unless we are successful in obtaining compensation on your behalf. This includes reimbursement for internet access and phone bills when used for remote work purposes. So, what to do? Federal law states that an employer only needs to reimburse their employees for work-related expenses that drop their earnings below theminimum wage. State agencies may reimburse an employee for personal cellular phone, smartphone, (i.e. The Division of Labor Standards protects all workers, including those that are undocumented or paid off the books, and ensures employers are following Labor Laws. Stock Exchanges Publish Clawback Proposals As required by Rule 10D-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the New York Stock Exchange (the "NYSE") and Nasdaq have issued their . Gather and convert employee feedback into real insights. Code. Mitigate risk with proactive payroll and tax alerts. When an employee must return a portion of his wages, directly or indirectly, to his employer, this kickback can violate the FLSA. Track critical documentation and control labor expenses. It's best to check your state's laws regarding what's considered a necessary business expense. Increase engagement and inspire employees with continuous development. RF%|h3H c"40JOwF}\5Y UGUn}:xIdRu :I8U xys B Jir:TxwO1;ZL&)[G&+E,NU; Where an employee incurs expenses on his employer's behalf or where he is required to expend sums by reason of action taken for the convenience of his employer, section 7 (e) (2) is applicable to reimbursement for such expenses. Also, the details of the employee's cell phone plan do not factor into the liability analysis. San Diego, CA, 92108 Even if your state does not mandate reimbursement to employees, experts recommend offering some type of reimbursement policy because it helps build loyalty and morale among your employees. In California, when employees must use their personal cell phones for work-related calls, employers must pay some reasonable percentage of those phone bills even if employees incurred no extra expenses using their cell phone for work. Other than those authorized by state or federal law, wage deductions generally require an employee's written authorization ( Iowa Code Ann. But, if your entire organization is remote full- or part-time, those costs would be necessary for your employees to do their jobs. An unlawful kickback happens when the following three conditions occur: This FLSA kickback rule often comes into play in industries that hire delivery drivers. Having a written employee expense reimbursement policy in your employee handbook is best to ensure your organization has an action plan for remote workers. 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. Employees must also submit requests for reimbursement within 30 days of incurring the eligible expense. @^_ {d1EQ2P%5{x n(,N5|_ \SfppMTn[6|4EF?F('DZnH6N},q'}l64a ux-c fp+"i+Q`p9xy#.BA%AZ94, You can also choose to only offer the benefit to employees in certain states or classes. Its also important to determine your states tax rules regarding reimbursements and how they will impact your companys and your employees taxes. Its time to be agents of change. Employers must reimburse employees for uniforms, purchased or rented equipment, or consumable supplies upon their termination of employment. More 0 found this answer helpful | 0 lawyers agree Helpful Unhelpful A: Generally, the burden is on the employer to make sure employees are getting reimbursed for business-related expenses. Cochran v. Schwan's Home Serv., Inc., 228 Cal. 3. In order to qualify for an accountable plan, the employers reimbursement or allowance arrangement must follow all three of these rules: Since accountable plan reimbursements arent considered wages, they arent subject to taxation and are also deductible by the employer as business expenses. This entry does not create an attorney-client relationship. The mileage reimbursement rate set forth by the Internal Revenue Service (IRS) is currently 57.5 cents per mile as of 2019. Unreimbursed employee expenses may be tax-deductible. Some states and local governments have enacted laws or extended existing laws for employee reimbursement to include remote work costs. For example, in New York, employers must. Employers must reimburse their employees within 30 days of the reimbursement becoming due. Federal law doesn't require employers to reimburse their employees for work expenses. Similar to California's law, the Illinois law has also been interpreted to require reimbursement for cell phone and internet expenses when employees are required to use their cell phones or internet for work purposes in addition to equipment such as routers, laptops, and printers. 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. Rules against interference with the exercise of rights under the ADA. (GINA). Get expert advice and helpful best practices so you can stay ahead of the latest HR trends. You can use the table below to quickly reference state and local laws about remote work employee reimbursement. at p. All communication from Paycor should be confirmed by your companys legal, tax, benefit, accounting or investment advisor before making any decisions. Schedule a call with a personalized benefits advisor today to see how employee stipends can help your organization offer remote work benefits. 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? 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. First, lets discuss why employers need to know remote work reimbursement laws. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LABionNum=2802. @C5q M\*(Oc{ 1XWHS"V4N ``,vd_ See a licensed agent for detailed information on your state. Tell us about your organization and what you want to accomplish and well recommend a custom solution. Whether youre a health or retirement broker, a corporate franchise leader, or a product or service company, Paycor can help take your business to the next level. Weve been helping our New York City clients fight for their right to adequate compensation for over thirty years. 4th 1137 (2014), employee Colin Cochran filed a putative class action lawsuit on behalf of customer service managers who were not reimbursed for expenses relating to the work-related use of their personal cell phones. Given this, when crafting a nationwide policy, sometimes its simplest to use California as the high water mark. 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 . There is no federal requirement to reimburse employees for business-related expenses. 2 0 obj App. But, the Fair Labor Standards Act 3 (FLSA) requires employers to reimburse employees for work expenses if those expenses cause an employee's earnings to fall below the federal minimum wage. Remote work has become the new normal for many Americans with over 27 million people working from home. This serves several purposes. Many even purchased new home office setups, including desks and chairs. Notably, employers are only required to reimburse "necessary" expenses in California, so businesses that do not require or encourage employees to work remotely are not required to reimburse these expenses, as employees have the option to work in the office, absent the FLSA and ADA restrictions noted above. Damages, of course, raise issues that are more complicated. (Id. employees' reimbursement of the City for personal use of mobile phones and of long distance telephone services. However, there are some costs that employers know employees will incur on a monthly basis and so it may make sense to provide a reimbursement on a more periodic basis. Employers that operate in several different jurisdictions are encouraged to familiarize themselves with the expense reimbursement requirements of all of those jurisdictions, if any. 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. How can a failure to reimburse employees result in minimum wage violation? While current statistics have shown a decline in new COVID-19 cases, many employers are contemplating continued remote work as part of their new normal. Access collaboration tools and resources that help champion equality and promote DE&I best practices in the workplace. No text or graphic contained in this entry is to be or should be used or relied upon as legal advice. Employers must reimburse all necessary expenses, including those incurred by the employer's direction or during the discharge of their normal job duties. 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. Our popular webinars cover the latest HR and compliance trends. Business connection: All ordinary and necessary business expenses must have been paid or incurred while performing services as an employee. Wireless communications services include all commercial mobile services which offer real-time, two-way voice or data service that is interconnected with the public switched telephone network or otherwise provides access to emergency communications services. The laws around what's considered necessary are relatively open to interpretation, but state laws generally define necessary as any expense required for the employee to complete their job. It follows that if employers allow their employees to opt to use their personal cell phone, instead of a company-issued cell phone, that they should be reimbursed a reasonable percentage of their phone bill for work-related calls or other data usage for using texts or the internet for work purposes. HR solutions purpose-built to help leaders create great places to work. 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. Law Department, governs the limited personal use of the City of New York's ("City") office and technology resources by City employees. 4th 1137 (2014). 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). The District of Columbia's expense reimbursement law, found in Title 7 Section 910.1 of the D.C. Municipal Regulations, requires employers to pay the cost of purchasing and maintaining any tools that the employer requires to perform the employer's business. Determining if you will need to pay taxes on expense reimbursements depends on whether you use an accountable or nonaccountable plan. You might also want to consider offering a remote work reimbursement to all your employees, whether legally required or not. This depends on the work performed, but reasonable reimbursable expenses will likely include: internet services, mobile data usage, laptop computers or tablets, and equipment such as copiers and printers. 10 states and Washington D.C. have laws that require certain remote work expenses to be reimbursed. Typically, you'll make reimbursement payments to your employees on their next paycheck. With this unprecedented shift in working habits, employers may be overlooking business-related expenses being incurred by their employees. (a) General rule. Federal law doesnt require employers to reimburse their employees for work expenses. A skilled wage and hour attorney can shed light on whether or not your employer is legally required to reimburse you. Build a great place to work where employees show up, make a difference and win together. 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. 91A.3 (6) ). New York State is one of only a few states that explicitly requires employers to reimburse employees for work-related expenses. Put this policy in writing and expressly state that employees may submit expense reimbursement requests each month to the extent that the flat rate does not cover the total expenses for the usage that month. 1. https://www.latimes.com/business/story/2022-04-07/covid-work-from-home-lawsuits-pandemic-business-expenses-litigation, 2. https://www.linkedin.com/news/story/amazon-sued-over-remote-work-costs-5351604/, 3. https://www.dol.gov/agencies/whd/flsa/pandemic#14. Some, particularly in tech, may be working from home through the end of the year, or even permanently! This shift raises the all-important question of who foots the bill for these expenses going forward. South Dakota Statute Codified Law 60-2-114. Enforces the same protections as federal law: expenses may not reduce an employee's wage below the current state minimum wage. 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." % For example, California allows an employee up to three years to submit a reimbursement request. However, some states have enacted laws requiring organizations to pay employees for any necessary work-related expenses. However, what is not well understood (or developed in the law) is how much must be reimbursed. Employees can claim unreimbursed expenses as deductible according to Pennsylvania Personal Income Tax law. Check out this guided tour to see for yourself how our platform works. Remote-firstorganizations can make big savings on real estatebut are they required to instead pay for remote employees expenses? It was last updated on February 9, 2023. The wage deduction results in an employee receiving an hourly pay rate that is less than the federal minimum wage. (b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. In the Cochran case mentioned above, the court of appeals held that employers must reimburse a reasonable percentage of their employees cell phone bills. Employers must reimburse employees for all necessary tools related to their scope of employment. Disclaimer: The information provided on this website is general in nature and does not apply to any specific U.S. state except where noted. Whenever an agreement between a bona fide labor organization and an employer or an association of employers requires that employees shall be paid an agreed wage or rate of wages for their services, it shall be unlawful for any person, either for that person or any other person, to request, demand or receive, either before or after such . New York State Department of Labor David A. Paterson, Governor M. Patricia Smith, Commissioner Phone: (518) 457-4380 Fax: (518) 485-1819 W. Averell Harriman State Office Campus, Bldg. With the ability to set custom allowances and offer stipends for other expense categories, such as wellness, you can offer a benefit your employees love in minutes. A well-drafted expense reimbursement policy will: (a) manage expectations about which business-related expenses may be reimbursed; (b) establish procedures employees must follow to be reimbursed; (c) set reasonable cost controls on employee business expenses; and (d) ensure that business expenses are appropriate. The requirements of the Americans With Disabilities Act (ADA) may also alter employer reimbursement obligations. 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. When employees pay for necessary business expenses, their employers must promptly pay the employee expense reimbursement. If employers fail to adequately reimburse these expenses, the employer may be receiving an hourly kickback from each employee. 115,9.5; Mont. Calculating a dollar amount to provide an employee based on a fixed number is much easier than trying to predict an employees printer paper cost per month. New York; Pennsylvania, and; . App. The FLSA does not explicitly require an employer to reimburse its employees for business expenses or deductions. More? This can be a valuable employee perk to help attract and retain employees in the tight labor market. 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. Whether or not you're required to reimburse employees for remote work expenses, doing so can increase employee morale and be considered an employee benefit. D.C. Municipal Register Title 7 Section 9105. 1144-1145.). Hire and retain staff with earned wage access. Employee stipends allow your remote workers to cover their employee expenses quickly and flexibly, all while satisfying state requirements for remote work expenses.