Many states do not have laws requiring reimbursement of remote work expenses, but enough states do that employers might consider creating a uniform national reimbursement policy.

Such a policy might be "easier to administer than a patchwork" approach, said Chris Olmsted, an attorney with Ogletree Deakins in San Diego.

Interactive Resource: Multistate Laws Comparison Tool

States with Reimbursement Mandates

The Fair Labor Standards Act (FLSA) does not require reimbursement of employment-related expenses, noted Peter Spanos, an attorney with Offit Kurman in Atlanta. "However, the FLSA provides that expenses incurred by employees for the benefit of the employer should not reduce their income below minimum wage."

States requiring employers to reimburse employees for certain remote work expenses include: California, Illinois, Iowa, Massachusetts, Minnesota, Montana, New Hampshire, New York, North Dakota, Pennsylvania, and South Dakota. In addition, the District of Columbia and Seattle mandate reimbursement of remote work expenses. 

"Most of these states require reimbursement of necessary expenses that relate to the performance of the employee's duties," Spanos said. 

But two states make reimbursement conditional on the employer's policy, he added. Iowa requires reimbursement of expenses authorized by the employer. New York requires payment only for expenses that are promised to the employee. 

Two states do not have the "necessary" condition for reimbursement and require payment for equipment or tools based only on their use in connection with employment, Spanos said. Minnesota requires reimbursement of expenses for "equipment used" in the work, except "tools of the trade." New Hampshire similarly requires payment for any expenses "incurred at the request of the employer" except for "expenses normally borne by the employee."

Pro-Rata Payments

None of the state laws that address employer reimbursement for remote work expenses provide for partial or pro-rata payments by the employer, Spanos said. "None of the state statutes address how allocation of expenses that are used both for work and personal activities should be done."

However, Olmsted said that courts and agencies generally favor a reasonable-percentage approach for mixed-use services like phone and internet rather than reimbursing the entire bill. 

"Employers can adopt standardized percentages by role or usage pattern and require employees to substantiate business use through plan tiers, usage data, or attestations, with periodic true-ups to ensure accuracy and compliance," he said. 

"Employers should also consider the tax implications associated with a reimbursement plan," Olmsted cautioned.

In addition, the expense reimbursement may be treated as compensation that needs to be factored into the regular rate of pay, said Natalie Bare, an attorney with Duane Morris in Philadelphia.

Written Policy

A concise written reimbursement policy should specify covered categories, dollar caps or stipends, documentation requirements, and a pre-approval process for unlisted expenditures, Olmsted said.

"In some states, including a deadline to request reimbursement may be an important component," he added. 

Expenses that would be incurred by the employee if the individual was not working for the employer are not covered by state reimbursement laws, Spanos said. "Certainly, any normal living expenses — such as food, furniture, [and] electric power — are not reimbursable under these laws."

Utilities, rent or mortgage payments, and normal wear and tear on furniture also are not covered by the laws, Olmsted said.

Typical examples of reimbursed expenses include computer equipment, printers, cellphones, internet connections, software licenses, and cameras and microphones for videoconferencing, Spanos noted. 

Other common expenses that employees may seek reimbursement for include printer ink, paper, desks, and desk chairs, Bare said.

If a desk or an ergonomic chair is necessary for performance of the employee's duties, it may be a reimbursable expense under state law, Spanos added. 

"If furniture or equipment is needed to accommodate a disability, then the reimbursement of such furniture or equipment may be required by disability laws even in states that do not have statutes requiring reimbursement of remote work expenses," he said.

Because the state laws are so broadly worded, employers should establish and communicate policies regarding which expenses are reimbursable and the procedures for submitting proof of these expenses for payment, Spanos said. "Clear policies are also a best practice to avoid potential discrimination claims or morale issues," he said.

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State Guidance

Most states that require reimbursement of remote work expenses provide little guidance for employers or employees regarding such payments.

However, the state of Illinois “is an exception to the lack of guidance on reimbursable expenses under state laws," Spanos said. 

Illinois law provides a five-part test for determining what expenses are covered:

• Whether the employee has any expectation of reimbursement.
• Whether the expense is 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.

Employers should clarify whether remote work is authorized, and, if it is, whether the employee has the option to work from the employer's office, Bare said. "If an employee has the option to go in to the office to work, an at-home office expense may not be necessary," she said.

This article is courtesy of Society for Human Resource Management (SHRM)