This guide covers employee business expense reimbursement across jurisdictions. The survey starts with seven states that have a general reimbursement statute: California, Illinois, Iowa, Montana, New Hampshire, North Dakota, and South Dakota. Other jurisdictions will be added in later batches.
Which states have a general statute requiring employers to reimburse business expenses?
California , Montana , North Dakota , and South Dakota require an employer to indemnify what an employee necessarily spends in direct consequence of job duties, while Illinois , Iowa , and New Hampshire reach only expenses the employer authorized, required, or requested.
The first four statutes contain no pre-approval condition in the cited text. On a touch screen, a tap shows all 4 sources in this group. Each of the other three turns on the employer's own decision: Illinois makes the employer liable only for an expense it authorized or required (or where it broke its own written policy), Iowa covers expenses the employer authorized, and New Hampshire covers expenses incurred at the employer's request. On a touch screen, a tap shows all 3 sources in this group.
Sources for this answer
California Labor Code § 2802(a) requires indemnity for necessary employee expenditures caused by job duties.
(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.
See Cal. Lab. Code § 2802(a)
Montana Code § 39-2-701(1) requires indemnity for necessary expenses caused by job duties.
(1) An employer shall indemnify an employee, except as prescribed in subsection (2), for all that the employee necessarily expends or loses in direct consequence of the discharge of duties as an employee or of the employee's 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.
See Mont. Code Ann. § 39-2-701(1)
North Dakota Century Code § 34-02-01 requires indemnity for necessary expenses caused by job duties.
An employer shall indemnify the employer's employee, except as prescribed in section 34-02-02, for all that the employee necessarily expends or loses in direct consequence of the discharge of the employee's duties as such or of the employee's obedience to the directions of the employer even though such directions were unlawful, unless the employee at the time of obeying such directions believed them to be unlawful.
See N.D. Cent. Code § 34-02-01
South Dakota Codified Laws § 60-2-1 requires indemnity for necessary expenses caused by job duties.
An employer shall indemnify an employee, except as provided in § 60-2-2 for all that the employee necessarily expends or loses in direct consequence of the discharge of the employee's duties, or of the employee's obedience to the direction of the employer, even though unlawful, unless the employee at the time of obeying such directions believed such directions to be unlawful.
See S.D. Codified Laws § 60-2-1
Illinois § 9.5(b) limits liability to necessary expenses the employer authorized or required, or when the employer did not follow its policy.
An employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure or the employer failed to comply with its own written expense reimbursement policy.
See 820 ILCS 115/9.5(b)
Iowa Code § 91A.3(6) requires reimbursement of employer-authorized expenses.
6. Expenses by the employee which are authorized by the employer and incurred by the employee shall either be reimbursed in advance of expenditure or be reimbursed not later than thirty days after the employee’s submission of an expense claim.
See Iowa Code § 91A.3(6)
New Hampshire § 275:57, I requires reimbursement of expenses incurred at the employer request, subject to its stated exceptions.
I. An employee who incurs expenses in connection with his or her employment and at the request of the employer, except those expenses normally borne by the employee as a precondition of employment, which are not paid for by wages, cash advance, or other means from the employer, shall be reimbursed for the payment of the expenses within 30 days of the presentation by the employee of proof of payment.
See N.H. Rev. Stat. Ann. § 275:57, I
What does federal minimum-wage law require for employee business expenses?
Under 29 C.F.R. § 531.35, wages count as paid only when paid free and clear, and an employer that requires an employee to supply tools of the trade violates the Fair Labor Standards Act in any workweek in which their cost cuts into the minimum or overtime wages due. On a touch screen, a tap shows all 2 sources in this group.
The federal rule is a floor rather than a general duty to reimburse every business expense. It is breached only when an employer-required cost pushes the week's pay below the minimum or overtime wages due.
Sources for this answer
29 C.F.R. § 531.35 requires wages to be paid finally and unconditionally, free and clear.
Whether in cash or in facilities, “wages” cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or “free and clear.”
See 29 C.F.R. § 531.35
29 C.F.R. § 531.35 treats employer-required tools as a violation when their employee-paid cost cuts into minimum or overtime wages in a workweek.
For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer's particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.
See 29 C.F.R. § 531.35
Can an offer letter or expense policy shift business expenses to the employee?
California voids agreements waiving its reimbursement protections, while Illinois permits written expense limits subject to statutory restrictions. On a touch screen, a tap shows all 2 sources in this group. Gattuso v. Harte-Hanks Shoppers, Inc. permits identifiable reimbursement through enhanced pay, but an agreed lump sum does not excuse less than full reimbursement. In Illinois, an employee who fails to follow an established written reimbursement policy is not entitled to reimbursement under the section.
Illinois permits policy specifications for necessary expenses, but its text bars a policy providing no reimbursement or only de minimis reimbursement. The cited reimbursement sections in Iowa, Montana, New Hampshire, North Dakota, and South Dakota do not address waiver expressly. On a touch screen, a tap shows all 5 sources in this group. Whatever a policy says, an employer-required tool cost cannot cut into minimum or overtime wages due under the federal rule.
Sources for this answer
California Labor Code § 2804 voids agreements waiving the benefits of its article.
Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void, and this article shall not deprive any employee or his personal representative of any right or remedy to which he is entitled under the laws of this State.
See Cal. Lab. Code § 2804
Gattuso permits enhanced compensation to satisfy reimbursement when its reimbursement portion can be apportioned.
We conclude that an employer may satisfy its statutory reimbursement obligation by paying employees enhanced compensation in the form of increases in base salary or increases in commission rates, or both, provided there is a means or method to apportion the enhanced compensation to determine what amount is being paid for labor performed and what amount is reimbursement for business expenses.
See Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554 (2007).
Gattuso holds that an agreed lump-sum payment does not relieve full reimbursement.
But, under section 2804, the existence of an agreement between an employer or employee regarding a lump-sum reimbursement payment would not relieve the employer of the statutory obligation to pay full reimbursement, nor would it bar an employee challenge to a lump-sum payment as being insufficient under section 2802 to provide full reimbursement.
See Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554 (2007).
Illinois § 9.5(b) denies reimbursement when an employee fails to comply with an established written policy.
(b) An employee is not entitled to reimbursement under this Section if (i) the employer has an established written expense reimbursement policy and (ii) the employee failed to comply with the written expense reimbursement policy.
See 820 ILCS 115/9.5(b)
Illinois § 9.5(b) permits policy specifications but bars no-reimbursement or de minimis reimbursement policies.
If the written expense reimbursement policy of an employer establishes specifications or guidelines for necessary expenditures, the employer is not liable under this Section for the portion of the expenditure amount that exceeds the specifications or guidelines of the policy so long as the employer does not institute a policy that provides for no reimbursement or de minimis reimbursement.
See 820 ILCS 115/9.5(b)
Iowa Code § 91A.3(6) sets a duty for authorized expenses without stating a waiver rule.
6. Expenses by the employee which are authorized by the employer and incurred by the employee shall either be reimbursed in advance of expenditure or be reimbursed not later than thirty days after the employee’s submission of an expense claim.
See Iowa Code § 91A.3(6)
Montana § 39-2-701(1) sets a necessary-expense duty without stating a waiver rule.
(1) An employer shall indemnify an employee, except as prescribed in subsection (2), for all that the employee necessarily expends or loses in direct consequence of the discharge of duties as an employee or of the employee's 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.
See Mont. Code Ann. § 39-2-701(1)
New Hampshire § 275:57, I sets a requested-expense duty without stating a waiver rule.
I. An employee who incurs expenses in connection with his or her employment and at the request of the employer, except those expenses normally borne by the employee as a precondition of employment, which are not paid for by wages, cash advance, or other means from the employer, shall be reimbursed for the payment of the expenses within 30 days of the presentation by the employee of proof of payment.
See N.H. Rev. Stat. Ann. § 275:57, I
North Dakota § 34-02-01 sets a necessary-expense duty without stating a waiver rule.
An employer shall indemnify the employer's employee, except as prescribed in section 34-02-02, for all that the employee necessarily expends or loses in direct consequence of the discharge of the employee's duties as such or of the employee's obedience to the directions of the employer even though such directions were unlawful, unless the employee at the time of obeying such directions believed them to be unlawful.
See N.D. Cent. Code § 34-02-01
South Dakota § 60-2-1 sets a necessary-expense duty without stating a waiver rule.
An employer shall indemnify an employee, except as provided in § 60-2-2 for all that the employee necessarily expends or loses in direct consequence of the discharge of the employee's duties, or of the employee's obedience to the direction of the employer, even though unlawful, unless the employee at the time of obeying such directions believed such directions to be unlawful.
See S.D. Codified Laws § 60-2-1
29 C.F.R. § 531.35 bars employer-required tools from reducing minimum or overtime wages due in a workweek.
For example, if it is a requirement of the employer that the employee must provide tools of the trade which will be used in or are specifically required for the performance of the employer's particular work, there would be a violation of the Act in any workweek when the cost of such tools purchased by the employee cuts into the minimum or overtime wages required to be paid him under the Act.
See 29 C.F.R. § 531.35
Must an employer reimburse remote-work costs such as a personal phone or home internet?
California requires a reasonable share of a personal phone bill when an employee must make work calls on that phone. Illinois reimbursement turns on an authorized or required necessary expense or the employer's failure to follow its own policy. North Dakota excludes the purchase or rental of equipment also used outside work.
Cochran v. Schwan's Home Service, Inc. concerns work calls on a personal cell phone; its rule calls for a reasonable percentage of the bill. None of the cited California, Illinois, and North Dakota provisions names remote work. On a touch screen, a tap shows all 3 sources in this group. The North Dakota equipment exclusion reaches a personal phone or computer also used outside work, while the quoted exclusion does not address a cost that is not equipment.
Sources for this answer
Cochran requires a reasonable percentage of the personal cell phone bill for required work calls.
Thus, to be in compliance with section 2802, the employer must pay some reasonable percentage of the employee’s cell phone bill.
See Cochran v. Schwan's Home Service, Inc., 228 Cal. App. 4th 1137 (2014).
Cochran treats required work calls on a personal cell phone as an expense under California § 2802.
If an employee is required to make work-related calls on a personal cell phone, then he or she is incurring an expense for purposes of section 2802.
See Cochran v. Schwan's Home Service, Inc., 228 Cal. App. 4th 1137 (2014).
California Labor Code § 2802(a) covers necessary expenses caused by duties without naming remote work.
(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.
See Cal. Lab. Code § 2802(a)
Illinois § 9.5(b) conditions liability on authorization, requirement, or failure to follow the employer policy.
An employer is not liable under this Section unless the employer authorized or required the employee to incur the necessary expenditure or the employer failed to comply with its own written expense reimbursement policy.
See 820 ILCS 115/9.5(b)
North Dakota § 34-02-01 excludes purchase or rental of equipment also used outside employment.
The obligation to indemnify does not include expenses incurred to purchase or rent tools of a trade or any other equipment that is also used by the employee outside the scope of employment.
See N.D. Cent. Code § 34-02-01