If your employees work in person, you probably have an intuitive sense of which expenses are your responsibility and which remain with your staff. You don’t need to buy your COO a spiffy new suit or take the whole office out to lunch every day—but you also wouldn’t dream of asking your team to fund the office electric bill or pay for their own desks.
But what about if your employees work from home? Do you need to pay their utilities? Buy them a desk? Chip in on rent?
Remote work expense reimbursement is an emerging area of employment law. As of 2023, 11 US jurisdictions require businesses to reimburse employees for certain necessary expenses. If you employ remote workers in one of these states, you may be required to reimburse employees for expenses related to working remotely.
What are reimbursable expenses?
Reimbursable expenses are also known as “necessary expenses,” a category defined by the IRS as any cost that is helpful and appropriate (but not necessarily indispensable) for a trade or business. Federal law allows businesses to deduct these expenses (known, in this case, as “necessary business expenses”). In most states, employees can’t deduct these expenses themselves. Instead, they can seek reimbursement from the business, which can reimburse the employee and deduct the expense at the business level.
Reimbursable expenses for remote workers can include the following:
- Certain utilities, including electricity, internet access, cell phone coverage, and mobile data storage
- Communications devices, including work computers and cell phones
- IT accessories, such as speakers, headsets, or cameras
- Office supplies, like printers, envelopes, paper, and ink
- Office equipment, including chairs, desks, and monitors
What federal law says about remote work expense reimbursement
Reimbursing employees for business expenses is a common practice, but it’s not necessarily mandatory. Under federal law, businesses are only required to reimburse employees for remote work expenses if unreimbursed work expenses would bring the employee’s total compensation below the federal minimum wage of $7.25 an hour.
This approach treats expense reimbursement as part of an employee’s total compensation package: If an employee isn’t being reimbursed for necessary expenses, they are effectively earning less, which is only illegal if the resulting rate of pay violates the minimum wage requirements outlined in the Fair Labor Standards Act.
What state laws say about remote work expense reimbursement
Nine US states and two local jurisdictions require employers to reimburse their employees for certain work-related expenses in certain situations:
- District of Columbia
- New Hampshire
- New York
- North Dakota
- South Dakota
These laws aren’t specific to remote work—rather, they apply generally to work-related expenses incurred by an employee, including those that arise out of remote work environments. Whether or not these laws explicitly apply to remote work expenses depends on court interpretation.
As an example, the June 2022 California court opinion Williams v. Amazon.com Services LLC found that the plaintiff “plausibly require[d] the use of physical space, internet, and electricity” to perform his job, entitling him to reimbursement for these expenses under California law. Based on this opinion, experts in California suggest that employers should expect to pay for at least a portion of basic costs for remote workers (including cell phone and internet coverage expenses), although many add that it is not yet clear how broadly the courts will interpret this responsibility. That creates a gray area around which expenses employers will need to cover and at what percentage of total cost to the employee.
Despite their ambiguity, employee expense reimbursement laws form the basis for individual and court interpretations of remote work expense reimbursement requirements. Here’s an overview of employee expense reimbursement laws by state.
California remote employee reimbursement
- Applicable law: California Labor Code Section 2802
- Reimbursable expenses: “All necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties”
California law requires employers to reimburse employees for necessary business expenses that are incurred during the course of employment, including internet access and phone bills for employees working remotely.
District of Columbia remote employee reimbursement
- Applicable law: D.C. Municipal Register Title 7 Section 910.5
- Reimbursable expenses: “The cost of purchasing and maintaining any tools required of the employee in the performance of the business of the employer”
DC employers are required to reimburse employees for all necessary tools related to their scope of employment. This can include internet and cell phone costs for employees who work from home.
Illinois remote employee reimbursement
- Applicable law: Illinois Wage Payment and Collection Act, Section 9.5: Reimbursement of employee expenses
- Reimbursable expenses: “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”
Illinois law requires employers to reimburse employees for all necessary expenses or losses, including phone and internet reimbursement when these tools are used for remote work purposes. Employers can specify what they’ll pay for each type of expense, and employees must submit requests for reimbursement within 30 days of incurring the expense.
Minnesota remote employee reimbursement
- Applicable law: Minnesota Statute 177.249
- Reimbursable expenses: “Purchased or rented equipment used in employment, except tools of a trade, a motor vehicle, or any other equipment which may be used outside the employment” and “consumable supplies required in the course of that employment”
Employers must provide a policy that offers reimbursement to employees for certain expenses upon their termination of employment. Reimbursable expenses for remote workers can include consumable supplies or purchased or rented equipment that can’t be used outside of employment.
Montana remote employee reimbursement
- Applicable law: Montana Code 39-2-701
- Reimbursable expenses: “All that [an employee] necessarily expends or loses in direct consequence of the discharge of [their] duties as such or of [their] obedience to the directions of the employer”
Monta employers are required to reimburse employees for all necessary expenses, which can include remote work expenses such as internet and cell phone bills.
New Hampshire remote employee reimbursement
- Applicable law: New Hampshire Revised Statutes 275:57
- Reimbursable expenses: “Expenses [incurred] in connection with […] employment and at the request of the employer, except those expenses normally borne by the employee as a precondition of employment”
New Hampshire employers are required by law to reimburse employees within 30 days for expenses connected with employment, which can include expenses related to working remotely.
North Dakota remote employee reimbursement
- Applicable law: North Dakota Century Code Section 34-02-01
- Reimbursable expenses: “All that the employee necessarily expends or loses in direct consequence of the discharge of the employee’s duties”
North Dakota employers are required by law to reimburse employees for expenses related to necessary duties or incurred at the employer’s direction. This can include cell phone or internet costs for remote workers.
South Dakota remote employee reimbursement
- Applicable law: South Dakota Statute Codified Law 60-2-114
- Reimbursable expenses: “All that the employee necessarily expends or loses in direct consequence of the discharge of the employee’s duties.”
South Dakota’s employers must reimburse employees for necessary expenses, which can include cell phone and internet expenses for employees working remotely.
Seattle remote employee reimbursement
- Applicable law: Seattle Wage Theft Law
- Reimbursable expenses: “All necessary expenditures or losses incurred by the employee in direct consequence of the discharge of the employee’s duties, or of the employee’s obedience to the directions of the employer”
Employers must reimburse employees for business expenses, which can include any necessary expenses arising from remote work.
States with conditional expense reimbursement laws and guidance
Three states also have expense reimbursement recommendations or provisions.
Iowa remote employee reimbursement
- Applicable law: Iowa Code 2022, Section 91A.37
- Reimbursable expenses: “Expenses by the employee which are authorized by the employer and incurred by the employee”
Iowa’s expense reimbursement law only applies to expenses that are authorized by the employer. Employers must provide a policy that reimburses employees for authorized necessary business expenses and provide payment within 30 days of receiving a claim. If an employer doesn’t pay the reimbursement request, they must provide a written notice explaining the decision within the same period.
Massachusetts remote employee reimbursement
- Applicable law: N/A
- Reimbursable expenses: According to guidance by the Massachusetts Attorney General’s office, employers should reimburse expenses that are “unavoidable and necessary” for employees to fulfill their job responsibilities.
Although Massachusetts law doesn’t require expense reimbursement, official guidance from the state’s Attorney General recommends that employers reimburse employees for necessary and unavoidable expenses.
New York remote employee reimbursement
- Applicable law: New York Labor Law 198-C
- Reimbursable expenses: Employers must pay any “benefits or wage supplements” that have been promised to an employee, including reimbursement for expenses.
Under New York law, employers are guilty of a misdemeanor if they fail to abide by the terms of any benefit or wage supplement agreements, including expense reimbursement agreements. If an employee’s contract stipulates that the employee will be reimbursed for certain expenses, the employer is required to pay.
Which states require cell phone reimbursement?
Because employees might use their personal cell phone to make business calls during the work week, some states have found that businesses must reimburse for these expenses. A recent California court ruling explicitly found that the state’s expense reimbursement laws apply to remote work costs, including cell phone expenses.
Including California, six states, plus DC and Seattle have necessary expense reimbursement laws that may require businesses to reimburse workers for cell phone expenses, but there’s still significant gray area in the application of these laws to specific aspects of remote work costs.
- District of Columbia
- New Hampshire
- North Dakota
- South Dakota
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