Remote employee reimbursement laws by state

In recent years, remote and hybrid work has become the new norm—a trend that’s helped many employers reduce their expenses. After all, if you have fewer employees working in the office, you can likely get by with a smaller (and cheaper) space.

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But the trend has also added some complexity. One big question: Do businesses need to reimburse remote employees for the work-related expenses they incur when working from home?

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The answer isn’t a straight yes or no. At the federal level, expense reimbursements are required under the Fair Labor Standards Act (FLSA) if those expenses drop a worker’s wages below the federal minimum wage—currently $7.25 per hour. This is true whether an employee works on-site or remotely.

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Outside this narrow requirement, individual states are free to decide whether reimbursements are required or at the employer’s discretion. As a result, 11 US states and two cities currently have laws in place requiring employee reimbursement under certain circumstances.

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Below, we’ll take a closer look at which states require employee reimbursements, how this may affect businesses that employ remote workers in those states, and the types of expenses that would typically be considered reimbursable.

Which states have reimbursement laws?

As of June 2024, 11 states require employee reimbursements by law:

1. California
2. Illinois
3. Iowa
4. Massachusetts
5. Minnesota
6. Montana
7. New Hampshire
8. New York
9. North Dakota
10. Pennsylvania
11. South Dakota

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Additionally, two cities have enacted laws requiring reimbursements:

1. The District of Columbia (Washington, D.C.)
2. Seattle, Washington

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If your business allows employees to work from home in these jurisdictions, it’s important to understand the specific state laws around reimbursements. 

Expense reimbursement laws by state

Below is an overview of individual state expense reimbursement laws and their requirements. 

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As a general rule of thumb, remote work expenses are typically covered by these laws only if remote workers don’t have the option of working in an on-site location. In voluntary work-from-home arrangements, employers typically aren’t required to reimburse expenses, though many still choose to do so.

California

Section 2802 of California’s labor code requires employers to reimburse any business-related expense incurred by an employee that’s necessary to their job duty or function. This includes expenses incurred at the direction of the employer.

Illinois

If an employee incurs an expense that is directly related to the scope of their employment, and which is directly related to the services they perform for their employer, the Illinois Wage Payment and Collection Act requires reimbursement.

Iowa

Under Iowa Code 91.A3(6), employers are required to reimburse any expense that is authorized by the employer. The reimbursement must be made either in advance of the employee incurring the expense, or within 30 days of the employee submitting a reimbursement request. 

Massachusetts

In Massachusetts, employers are required to reimburse any expenses that would drop the employee’s wage below the state’s minimum wage—$15 per hour, as of 2024. That being said, the state Attorney General’s Office has recommended that employers should reimburse any unavoidable or necessary expenses required for employees to carry out their job duties.

Minnesota

Minnesota Statute 177.24 requires employers to reimburse employees upon termination for certain necessary expenditures related to performing their job. Following the reimbursement, the employer can require that the employee return any items for which they were reimbursed. This includes expenses related to consumable supplies (paper, ink, etc.), uniforms, rented or purchased equipment, and travel expenses unrelated to regular commuting. Exceptions include motor vehicles, tools of a trade (e.g., plumber’s tools), and other equipment that can be used outside the job.

Montana

Under Montana Code 39-2-701, employees are entitled to reimbursement for all necessary expenses incurred either at the direction of their employer or over the regular course of performing their job. The broad language of the code may extend reimbursement requirements to cover a portion of costs like cell phone bills and data plans, internet access, and even electricity and utility bills.

New Hampshire

In New Hampshire, if an employer requires the employee to pay for an expense related to their job, they are required to reimburse the employee within 30 days of the employee submitting a reimbursement request. Alternatively, employers can cover the expense with a cash advance if desired.

New York

New York Labor Law Section 198-C requires employee reimbursement only in instances where there is an explicit agreement between the employer and employee that specifies expense reimbursement. An example of such an agreement might include an employment contract. Failure to provide reimbursements in this manner is considered a misdemeanor in the state. 

North Dakota

North Dakota requires employers to reimburse any expense an employee incurs in direct “consequence or discharge” of their duties under the state’s Century Code 34-02-01. This requirement doesn’t extend to items or equipment the employee purchased that they use outside their job.

Pennsylvania 

Pennsylvania does not explicitly require employers to reimburse employee expenses. That being said, under the state’s Wage Payment and Collection Law, if an employer agrees to reimburse expenses, the reimbursement must be made within 60 days of the employee’s reimbursement request. It’s worth noting employees can also claim unreimbursed expenses on their state income tax return.

South Dakota

Under section 60-2-1 of South Dakota’s Labor and Employment laws, employees are entitled to reimbursement of any necessary expense incurred as a consequence of completing their job duties. Moreover, if an employee breaks the law under the direction of their employer, expenses related to the act are also reimbursable as long as the employee didn’t know their actions were illegal.

Seattle, Washington

The State of Washington does not require employers to reimburse employee expenses except in cases that would break the rules outlined in the federal Fair Labor Standards Act. With that said, unreimbursed expenses are tax-deductible and can be used to reduce the employee’s taxable income for the year.

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In Seattle specifically, the Seattle Wage Theft Ordinance requires employees to be reimbursed for all necessary expenses they incur on the job.

Washington, D.C.

Under Rule 7.910.1 of the D.C. Municipal Regulations and Register, employers must reimburse employee expenses related to the purchase and maintenance of any tool an employee requires to perform their job function.

What expenses must be reimbursed?

The exact language specifying which expenses are reimbursable varies depending on the individual state law, but there is generally some agreement across the board:

Mandatory vs. remote work

First, as noted above, expense reimbursements related to remote work are typically only required if the employee doesn’t have the option to work on-site. This can include instances where:

• The state or federal government mandates remote or hybrid work
• The company mandates remote or hybrid work
• The employee was hired as a remote worker in a state where the company does not have a physical presence

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When the employee chooses to work remotely but is not required to, expense reimbursements are typically left to the employer’s discretion.

Necessary costs

Additionally, most state laws only require expense reimbursement for costs that are deemed to be “necessary”—in other words, expenses that are required for an employee to be able to do their job.

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Some common examples of remote expenses that are often reimbursable under these guidelines include:

• Office supplies: Notebooks, pens, pencils, printer paper, etc.
• Electronics: Laptops, desktop computers, monitors, speakers, headsets, microphones, mice, keyboards, printers, etc.
• Office equipment: Desks, standing desks, chairs, etc.
• Connectivity: Internet, cell phone, data, and landline plans
• Tools of the trade: Plumber’s tools, electrician’s tools, etc.

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In some states with very vague or employee-friendly reimbursement laws, employers may even be required to reimburse a portion of the employee’s utility bill each month—such as their electricity, gas, and water bills.

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Tips for getting remote employee expense reimbursement right

There’s some good news for employers in all this: As long as employee reimbursements are properly tracked and documented, you can likely write off any reimbursement that is necessary and regular for your industry.

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Here are some tips you can use to make sure you’re getting remote reimbursements right:

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• When hiring remote workers, make sure you understand the reimbursement laws for their home state so you know whether you need to reimburse their expenses
• Implement a thorough expense reimbursement policy that outlines spending limits and establishes which expenses an employee can make at their own discretion and which ones need prior approval
• Clearly communicate your reimbursement policy and approvals process with all relevant staff—and consider automating your expense approval process as much as possible
• Consider alternatives to reimbursements, such as corporate credit cards with preloaded remote work stipends, which could help simplify the issue

Ramp: Expense management made simple

Ramp makes it easier to manage expenses. Our expense management software was designed to help you streamline your entire reimbursement process—whether employees are on-site or remote, and whether reimbursements are discretionary or required by law.

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Plus, our suite of automation tools helps streamline everything from receipt collection to request approvals, and our real-time reporting allows both small businesses and larger enterprises to track spending and keep accurate financial records.

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Want to learn more about how we can help? See a demo to check out Ramp in action.