Seattle: Employers must pay employees all compensation owed to them, including any business expenses. Typically, you'll make reimbursement payments to your employees on their next paycheck. There is no federal requirement to reimburse employees for business-related expenses. It was last updated on February 9, 2023. The Cochran case provides guidance on how to calculate a reasonable reimbursement for the mandatory use of personal devices such as cell phones: employers must compensate their employees for a "reasonable percentage" of the employee's cell phone bill under Section 2802. Its also important to determine your states tax rules regarding reimbursements and how they will impact your companys and your employees taxes. 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. 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. For example, in New York, employers must. 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Amounts recovered pursuant to this section shall be paid to the affected employee. Lets create value across your portfolio. Employee reimbursements are at the employers discretion. <> Even fewer states require reimbursement for remote work expenses. For help crafting your expense reimbursement policy, please contact your Baker McKenzie employment lawyer. Reimbursements are considered nonaccountable if: The IRS Publication 15 and Publication 535 have more details about the tax implications of business expenses and reimbursements. United States. 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/. The FLSA does not explicitly require an employer to reimburse its employees for business expenses or deductions. 3 0 obj Public Utility Law Project of New York 194 Washington Avenue - Suite 320. Get insights into your workforce to make critical business decisions. Damages, of course, raise issues that are more complicated. (Id. Maximize training and development with personalized content. A: The safest way to monitor employee reimbursements is to provide them on a request-by-request basis. Labor Code section 2802, referenced by the court, governs this area [concerning reimbursement for all necessary employee expenditures or losses, not just cell phone use) and provides the backdrop for the courts opinion: (a) An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful. 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).). All communication from Paycor should be confirmed by your companys legal, tax, benefit, accounting or investment advisor before making any decisions. Lastly, you know these new business expense reimbursement laws could impact your budgets going forward. Cochran v. Schwan's Home Serv., Inc., 228 Cal. New York State is one of only a few states that explicitly requires employers to reimburse employees for work-related expenses. Employers must reimburse California employees for all necessary expenses, including those incurred at the employer's direction. Schedule a call with a personalized benefits advisor today to see how employee stipends can help your organization offer remote work benefits. Reduce risk, save time, and simplify compliance management. 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 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. New York, Join us at our exclusive partner conference. Whether the employees have cell phones. 2021), Charged Speech in the Workplace: Knowing When to Step In (Jan. 2021), Diversity, Equity & Inclusion | Best Practices for Managing & Collecting Employee Diversity Data (Oct. 2020), How Employment Counsel Add Value to a Companys Inclusion & Diversity Programs (Sept. 2020), Navigating Political Speech in the Workplace (Aug. 2020), 2023: Discussion on The New Legal Restructuring Landscape in Europe Series (Jan. Feb. 2023), Annual Illinois Employer Update (Jan. 2023), Annual California Employer Update (Dec. 2022), Navigating the World: An Update on Key Global Employment Laws and Trends for US Multinational Employers series (June 2022), California Seeks to Ban Most Criminal Background Checks, Employer WARN-ING: Potential Changes to New Yorks and Californias WARN Acts Barreling Down the Turnpike, Global Employment Law Fastpass for US Multinationals (Webinar Series), Reading the Tea Leaves: What the NLRB GCs New Guidance on Separation Agreements Means for Employers. In some instances, telework may be provided to qualified individuals with disabilities as a reasonable accommodation under the ADA. The Reimbursement Amount Is A Reasonable Percentage Of The Employees Phone Bill. This includes reimbursement for internet access and phone bills when used for remote work purposes. Federal law doesn't require employers to reimburse their employees for work expenses. For example, California allows an employee up to three years to submit a reimbursement request. In those cases, the Department of Labor (DOL) has instructed that employers may not require employees to pay or reimburse their employers for remote work costs such as internet access, a computer, additional phone line, and increased use of electricity if telework is being offered as a reasonable accommodation. However, an important caveat to that rule is that an employer may not require employees to pay or reimburse their employer for work-related expenses if it would cause the employee's pay rate to fall below the required minimum wage ($7.25) for hourly employees or salary threshold ($684 per week) for exempt employees. The consequences to the employer for violations are severe, including penalties, interest and attorneys fees (subsections (b), (c) and (d).). However, there's still quite a bit of a gray area in other states. According to Abacus' How to Create a Cell Phone Reimbursement Policy, they suggest "$50 for low business use and $75 for high business use." Also, here's a handy calculator to help you identify how much you should be spending on mobile stipends. Currently, 11 states, the District of Columbia, and Seattle, Washington, have laws about reimbursing employees for necessary work-related expenses. Finally, employers operating in these above-referenced jurisdictions should coordinate with a Labor & Employment attorney to review your existing expense reimbursement policy or create and implement such a policy. Offering a stipend can be an attractive benefit to prospective employees, especially when they are weighing their options and comparing benefits packages. Once you understand your obligations, set clear guidelines for your employees. When employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. These federal requirements apply to all business expenses. If you want specific legal advice about your particular legal issues, or if you want to create an attorney-client relationship, you need to retain the Law Offices of Ron A. Stormoen by a signed written retainer agreement. Today, more than 27.6 million people work from home as opposed to the roughly 9 million people in 2019 (American Community Survey). at p. Heres our guide to choosing and moving to a better payroll provider. With so many employees working remotely, employers also began to wonder if they should reimburse their employees. Offering a remote work stipend is a great way to meet state reimbursement requirements while providing your employees with a quality benefit. 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. 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