In the wake of the Covid-19 pandemic, remote work surged, bringing with it new challenges regarding work-related expenses. While the federal Fair Labor Standards Act (FLSA) does not mandate employers to reimburse expenses incurred in a home office setting, several state laws have stepped in to fill this gap.
Read on to learn more about various states and their requirements. Request a free legal consultation from PLBH at (800) 435-7542 with further questions.
State Laws and Employee Reimbursements
While federal guidelines under the FLSA generally exempt employers from reimbursing home-based work expenses, certain states have implemented their own regulations. States like California and Illinois have specific requirements for these reimbursements. The FLSA does intervene if unreimbursed expenses push an employee’s earnings below the minimum wage, but this scenario is uncommon.
A range of states, including California, Illinois, New York, and Pennsylvania, among others, have established statutes regarding employer obligations to cover business expenses. These laws vary significantly. For example, Minnesota mandates compensation for certain business expenses at employment’s end, whereas in New York, failure to reimburse can lead to criminal charges.
Employer Discretion in Reimbursement Policies
Many employers opt to reimburse business expenses even when not legally required. Such terms are often detailed in employment contracts or employee handbooks. Non-adherence to these agreed terms can constitute a breach of contract.
Types of Reimbursable Remote Work Expenses
Typical reimbursable expenses include phone and internet usage for business purposes, postage, online subscription services, printers and supplies, office equipment, and work computers. The extent of coverage depends on the job’s requirements and the employer’s reimbursement policies. Notably, company-provided home office equipment usually remains the property of the employer.
Spotlight on California’s Laws
California stands out with its comprehensive approach to employee reimbursements. Employees in California are entitled to reimbursement for all reasonable expenses incurred due to their job. This can extend to utilities, travel expenses, and even attorneys’ fees for reimbursement disputes. California also allows for wage and hour lawsuits and protects employees from retaliation for filing such claims.
Tax Implications of Reimbursements
The IRS allows tax deductions for reimbursed business expenses under certain conditions, such as the expense being ordinary and necessary, adequately substantiated, and any excess reimbursement being returned to the employer in a timely manner. Failing these conditions, the reimbursement is taxable income.
Home Office Deductions: A Note for Employees
Interestingly, employees setting up home offices cannot claim the home office deduction, a privilege reserved for self-employed individuals and independent contractors. This change stems from the Tax Cut and Jobs Act, which eliminated this deduction for W-2 employees from 2018 through 2025.
Contact an Attorney for Help
The shift to remote work has highlighted the importance of understanding state-specific laws on work-related expense reimbursement. Employees should familiarize themselves with their rights and employers’ obligations to ensure fair and lawful treatment in the evolving work landscape. If you have questions, contact an employment law attorney.