Employers in Illinois now have significant new recordkeeping obligations with respect to employee expense reimbursement as well as a bit more direction about when reimbursement is required. 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. New rules have now been released and we address the key points below.

Recordkeeping
Employers must keep all of the following for at least three years:

Any policies regarding reimbursement
Employee requests for reimbursement
Documentation showing approval or denial of reimbursement
Documentation showing actual reimbursement, including any supporting documents
Meaning of “Primary Benefit”
The statute requiring reimbursement says that employees must be reimbursed for necessary expenditures, which include all reasonable expenditures required of employees while doing their job and that are for the primary benefit of the employer. While we still don’t have guidelines for what counts as “reasonable,” IDOL has provided a five-factor test to determine whether an expense is for the primary benefit of the employer. 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 you can rule out reimbursement. The factors are:

Whether the employee has any expectation of reimbursement.
Whether the expense is required or necessary to perform the employee’s job duties.
Whether the employer is receiving a value that it would otherwise need to pay for.
How long the employer is receiving the benefit.
Whether the expense is required of the job.
Unreimbursed Expenses
Expenses that should have been reimbursed but were not, are now owed to departing employees as part of their final pay. Making unreimbursed expenses part of their final pay creates both a payment deadline and employer liability under the wage payment law.

Policies Not Followed
The new regulation warns that if employers have a practice of reimbursing employees for expenses above and beyond their policy limits, deviating from that practice would be a violation of the law. In essence, if you let some people exceed the policy limits and still get fully reimbursed, you need to let everyone exceed the policy limits and get fully reimbursed.