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Business Expense Reimbursement for the Remote Workforce

The new and unprecedented shift in working habits from established offices to a remote workforce has become the impetus of change in employer reimbursement policy to include reimbursement of expenses remote workers are incurring in connection to the fulfillment of their job duties.

It has long been common practice for employees to be reimbursed for meals, lodging, and other expenses during work trips as a normal and customary business expense. The new and unprecedented shift in working habits from established offices to a remote workforce has become the impetus of change in employer reimbursement policy to include reimbursement of expenses remote workers are incurring in connection to the fulfillment of their job duties. Such expenses include typically expected office supplies, but further extend to the employees’ work related use of phone service, internet, printer paper and toner, and work related equipment.

State labor laws throughout the country vary in employer requirements of what needs reimbursement as well as the application of the law itself. State laws exist in AK, CA, IL, IA, IN, KY, MA, MI, MN, MT, NH, NY, ND, PA, SD, and D.C.

Some states are more robust in the scope of their laws. California, Illinois, and Montana amongst them, especially in protecting employees for their personal use of cell phones, landlines, and internet expenses used in their jobs. While the courts acknowledge that a remote workforce may result in the beneficial reduction of employer operating costs, they make it clear that such costs savings cannot be done “by shifting these costs to [the employer’s] employees.” Other states like Alaska and Arkansas only require reimbursements if work related equipment is purchased by the employee and not suitable for “normal social activities of the employee”. And, some states mirror the less stringent threshold under the Fair Labor Standards Act (FSLA) requiring reimbursement by employers only if such expense would otherwise bring the employee’s earnings below the federal minimum wage.

Employers may view a Remote Workforce Policy unnecessary since such costs may be small and manageable, but those employers should consider the much greater cost and exposure of defending any lawsuit of disgruntle employees. They should become familiar with the laws in the states in which employees will be working and evaluate what that state sets as obligations of an employer with remote workers. Should a company determine a nationwide policy is in order, perhaps they should consider modeling the policy against the high water mark of a state like California or Illinois.

Keep in mind that states and the FSLA may also impose other mandates that affect the mobile workforce such as ensuring employers pay remote workers for all the time worked. This can become complicated when many a work day have drifted from a 9 to 5 norm to a more household friendly – help the at home student, walk the dog, care for another family member - employee work day. And if employers employ the use of technology to monitor hours in an effort to ensure pay compliance, that in some areas, statutes like the California Consumer Privacy Act require full disclosure to employees of the data collection and use practices of the employer.

As with all established policies the goal of a remote reimbursement policy should be two-fold: (1) Fair and equitable treatment of employees, and (2) Ending-up with a policy that complies with state and federal laws and one that minimize the employer’s risk of facing adverse actions by employees.

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How This Impacts Mobility

The changing workforce, especially during these stressful times, requires rethinking of many previously establish employee policies. Expense reimbursement of employee business expenses are impacted by the Department of Labor, FSLA statutes, state laws and code sections of the Internal Revenue Service (IRS). A well-written remote work expense reimbursement policy will detail which expenses qualify for reimbursement under which scenarios, and should detail the process for requesting reimbursement, and explain the substantiation required. Employers should evaluate the laws at the location of their workers, and confirm that the payment process stays in statutory compliance and ensures non-taxable treatment of all reimbursements.

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