New Year, New Legal Hurdles For Illinois Employers
On January 1, 2019, a recent addition to the Illinois Wage Payment and Collection Act (IWPCA) will take effect, imposing a new burden on Illinois employers.
The IWPCA, which generally governs the payment of wages and final compensation in Illinois, will now require employers to reimburse employees for all "necessary expenditures or losses." In order to qualify for reimbursement under the statute, the expense must:
- fall within the employee’s scope of employment;
- directly relate to services performed for the employer;
- be reasonable;
- be required of the employee in the discharge of his or her duties; and
- inure to the primary benefit of the employer.
Employees have 30 days after incurring the expense to submit supporting documentation. If supporting documentation is nonexistent or lost, the employee can instead submit a signed statement affirming the expense.
An employer is not responsible for losses due to an employee’s negligence, due to normal wear, or due to theft, unless the theft was a result of the employer’s negligence.
Notably, an employer can maintain a written expense reimbursement policy with specific procedures for reimbursement, so long as the policy does not provide for ‘no reimbursement’ or ‘de minimus reimbursement.’ In other words, employers cannot maintain a policy that simply sidesteps the IWPCA. If the employer does have an established written expense reimbursement policy, and the employee fails to comply, then the employer is not liable for the expense.
The amendment notes that an employer is also not liable for an expense unless the employer authorized or required the expense or the employer failed to comply with its own written policy.
Though a relatively small addition, the new language adds a new wrinkle to wage and hour litigation in Illinois. In the past, with no statutory ammunition at their disposal, employees seeking to recoup unreimbursed expenses have had to file breach of contract claims against their employers. Now, they will be able to rely on the clear language of the IWPCA. While the amendment does not change the definition of "wages" to include expense reimbursements, aggrieved employees will surely argue that they are entitled to use the IWPCA’s attorney’s fee and liquidated damage provisions, increasing the potential cost of non-compliance by employers.
The IWPCA applies to all employers and employees in Illinois, including employees of local governments and school districts, but not employees of the State or Federal government.
Heading into the new year, employers should review their expense reimbursement policies for conformity with the IWPCA. Specifically:
- Remove any language that prohibits reimbursement without a receipt (or clarify that a signed statement will suffice if the receipt is lost);
- Confirm that employees have at least 30 days (or longer) to submit their expenses; and
- Clarify which types of expenses are authorized or required and which types of expenses need special authorization.
Should you have any questions or if you would like to discuss how this new amendment to the IWPCA will impact your company, please contact your regular Saul Ewing Arnstein & Lehr LLP labor and employment attorney.