Expense Reimbursement Laws by State (2026)

Fact-checked July 25, 2026

Federal law does not force you to reimburse business expenses — it only stops unreimbursed costs from pushing pay below the minimum wage.

That is the national floor. The Fair Labor Standards Act has no general expense-reimbursement statute. The protection that does exist is a minimum-wage rule: if required work costs cut an employee's effective wages below the federal floor, the employer has a problem under 29 USC §206 and the "free and clear" kickback regulation at 29 CFR §531.35.

Above that floor, a small set of jurisdictions create affirmative reimbursement duties. California Labor Code §2802 is the broadest: it indemnifies employees for "all necessary expenditures or losses" incurred in direct consequence of their duties, adds interest from the date of the expense, and treats attorney's fees as a recoverable cost. Illinois, the Field Code states (Montana, North Dakota, South Dakota), New Hampshire, Massachusetts (transportation), Iowa (authorized-expense timing), the District of Columbia (tools and uniforms), and Seattle add their own layers. Everywhere else, the federal kickback floor is usually all the statute requires.

Personal-vehicle mileage is the highest-volume satellite topic. For the IRS standard rate, accountable-plan tax treatment, FAVR plans, and vehicle-specific compliance, use the companion research on mileage reimbursement requirements by state. This piece is the broader anchor: when any work-driven cost — cell phone, internet, home office, tools, uniforms, travel — becomes the employer's problem.

Skip to the state-by-state table →

Which sections matter for you

Quick reference

The 5 most expensive reimbursement mistakes

1. Treating California §2802 like a soft policy preference

California Labor Code §2802 is not a handbook courtesy. It is a fee-shifting indemnification statute.

Under §2802(c), "necessary expenditures or losses" include attorney's fees the employee incurs enforcing the right. Fee-shifting is one-way: a prevailing employee recovers fees; a prevailing employer does not. §2802(b) attaches interest at the civil judgment rate — 10% under CCP §685.010 — from the date the expense was incurred, not from judgment. Multi-year cell-phone or remote-work claims routinely end up multiples of the unreimbursed principal once fees and interest attach.

2. Refusing cell-phone reimbursement because the plan was unlimited

Cochran v. Schwan's Home Service, Inc., 228 Cal. App. 4th 1137 (2014), closed the "no marginal cost" defense.

The Court of Appeal held that when an employee must use a personal cell phone for work-related calls, §2802 requires reimbursement of a reasonable percentage of the bill. Unlimited minutes, family-paid plans, and zero incremental out-of-pocket cost do not erase the duty. The employer still received the business use of the phone. Compliance patterns usually settle on a fixed monthly stipend rather than a litigated percentage.

3. Blaming the government for remote-work costs

Thai v. International Business Machines Corp., 93 Cal. App. 5th 364 (2023), rejected the proximate-cause defense.

IBM argued that Governor Newsom's stay-home order — not IBM — caused employees' home internet, phone, headset, and monitor costs. The Court of Appeal said §2802 does not turn on whether the employer's order was the proximate cause of the expense. It turns on whether the expense was actually due to performance of the employee's duties. If the work required the home setup, the setup was reimbursable.

Williams v. Amazon.com Services LLC, No. 3:22-cv-01892 (N.D. Cal.), later settled for $950,000 (final approval January 23, 2024) on California remote-worker home-internet claims.

4. Using a lump-sum salary "bump" without apportionment proof

Gattuso v. Harte-Hanks Shoppers, Inc., 42 Cal. 4th 554 (2007), allows three reimbursement methods: actual expense, a per-unit rate (for example, cents per mile), or a lump-sum enhancement to salary or commission.

The lump-sum path is the trap. The employer must identify which portion of pay is the expense reimbursement and prove the amount is enough to cover actual necessary costs. The employee can still challenge adequacy. Almost no California employer wants that burden. The practical safe harbor is a transparent stipend or rate, not a quiet salary bump labeled "covers expenses."

5. Telling W-2 employees to "just deduct it on your taxes"

That path is largely gone.

IRC §67(g) suspended miscellaneous itemized deductions for unreimbursed employee business expenses. The One Big Beautiful Bill Act (2025) made the suspension permanent. A narrow educator-expense carve-out remains at IRC §62(a)(2)(D). For ordinary W-2 employees, an unreimbursed work cost is fully out-of-pocket federally. That sharpens reimbursement claims in duty states and raises the stakes of silent nonpayment everywhere else.

The federal floor — kickback rule, not reimbursement duty

No FLSA expense-reimbursement statute

The FLSA sets minimum wage and overtime. It does not say "reimburse cell phones," "pay for home internet," or "cover personal-vehicle miles." There is no general federal expense statute analogous to California §2802.

29 CFR §531.35 — free and clear / kickbacks

The regulation that carries the federal expense issue is 29 CFR §531.35:

"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.' The wage requirements of the Act will not be met where the employee 'kicks-back' directly or indirectly to the employer or to another person for the employer's benefit the whole or part of the wage delivered to the employee."

The tools-of-trade example is the operational core:

"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 under the Act."

At the federal minimum wage of $7.25/hr, this bites mainly for lower-wage workers whose required tools, uniforms, equipment, or vehicle costs pull effective pay below the floor. Higher-paid hourly and salaried workers generally get no federal expense protection at all.

29 CFR §531.32 — employer-benefit items are not "facilities"

29 CFR §531.32 prevents employers from counting certain employer-benefit costs as wage-crediting "facilities." Items primarily for the employer's benefit or convenience — including required safety equipment and, in enumerated examples, required uniform rental — cannot be charged against the minimum wage as facilities credit. Together with §531.35, this is the full federal expense framework.

DOL guidance on reasonable approximation

DOL opinion letter FLSA2008-15 (Sept. 11, 2008) accepts a reasonable approximation of actual vehicle expense — often pegged to the IRS standard mileage rate — as satisfying the kickback rule for minimum-wage purposes when personal vehicles are used for work. The Field Operations Handbook Chapter 30 is the internal enforcement companion on deductions, kickbacks, and tools of the trade.

State minimum wages above $7.25 raise the kickback floor in those states. A required expense that is harmless against the federal floor can still violate a higher state minimum-wage structure.

California Labor Code §2802 — the strictest state

California is the national benchmark for expense reimbursement. The statute is broad, the case law is employee-friendly on modern categories, and the recoverable stack includes principal, interest, and attorney's fees.

§2802(a) — the indemnification rule

"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."

Three features matter in practice:

  • Indemnification language. The employee is held harmless from the cost of doing the job. Refusing reimbursement is not merely denying a benefit; it shifts operating cost onto the employee against the statute's direction.
  • "In direct consequence." The expense must arise from the work. Thai confirmed that the employer's order need not be the proximate cause of the expense; it is enough that the expense was actually due to performance of duties.
  • "Even though unlawful." Employees who follow directions in good faith are protected even when those directions later prove unlawful.

§2802(b) and (c) — interest and fees

Interest accrues from the date the employee incurred the expense, at the civil judgment rate (CCP §685.010 — 10% per year). Attorney's fees enforcing §2802 are themselves "necessary expenditures" under §2802(c).

Limitations

  • 3 years for the statutory claim under CCP §338(a).
  • 4 years when repackaged as an unfair-competition claim under Bus. & Prof. Code §17208 — a routine litigation extension of the lookback.

Recognized "necessary expenditure" categories

California courts and settled practice have treated these categories as inside §2802 when required for the job:

  • Personal-vehicle costs for business miles (Gattuso).
  • A reasonable percentage of a personal cell-phone bill (Cochran).
  • Home internet, headsets, monitors, and required remote-work equipment (Thai; Williams).
  • Required tools and equipment that are not ordinary precondition-of-employment items.
  • Required uniforms that are not ordinary street clothes usable in the occupation.
  • Required training travel and business meals during required travel.
  • Required certifications or licenses when the credential is a job condition imposed by the employer.

Boundary case: Townley v. BJ's Restaurants, Inc.

Townley v. BJ's Restaurants, Inc., No. C086672 (Cal. Ct. App. 2019), is the employer-side boundary.

A restaurant server had to wear black slip-resistant shoes. She sought reimbursement under §2802. The Court of Appeal held that non-specialty shoes that are usual and generally usable in the restaurant occupation are not "necessary expenditures" under §2802 merely because the employer requires slip resistance. Ordinary occupational clothing that is not a unique uniform stays outside the statute. Specialty protective equipment and true uniforms remain a different analysis.

Gattuso — three reimbursement methods

The California Supreme Court in Gattuso allowed:

  1. Actual-expense reimbursement.
  2. A fixed rate per unit (for mileage, a cents-per-mile rate).
  3. Lump-sum payment through salary or commission enhancement — only if the employer identifies the reimbursement portion and proves adequacy.

Employees can challenge any method as insufficient. Transparent actual-expense or rate-based methods are the operational default.

Things employers consistently miss

  • Interest runs from each expense date, not from the lawsuit or judgment date.
  • Attorney's fees can dwarf the unreimbursed principal in class or PAGA matters.
  • Cell-phone duty does not depend on marginal cost after Cochran.
  • Remote-work setup can be reimbursable even when a public-health order forced the work home after Thai.
  • Work location controls multi-state exposure: a Texas company with a California remote employee still faces §2802 on California-side work.
  • Ordinary street clothes and non-specialty shoes remain limited by Townley; specialty tools, unique uniforms, and true protective gear do not automatically get the same break.

Illinois — 820 ILCS 115/9.5

Illinois is the most important non-California broad-duty statute. Effective January 1, 2019, 820 ILCS 115/9.5 amended the Illinois Wage Payment and Collection Act:

"An employer shall reimburse an employee for all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer."

"Necessary expenditures" means reasonable expenditures or losses required in the discharge of employment duties that inure to the primary benefit of the employer.

Key employer-facing features:

  • Authorization / requirement. The employer must have authorized or required the expenditure, or failed to follow its own written policy.
  • 30-day submission window. Employees must submit claims with supporting documentation within 30 calendar days unless a written policy allows longer.
  • Written statement when receipts are missing. A signed employee statement can substitute for lost or nonexistent receipts.
  • Reasonable written caps allowed. A written policy may set specifications or guidelines. The employer is not liable for amounts above the guideline if the policy is not a no-reimbursement or de minimis sham.
  • Negligence carve-out. Losses from employee negligence, normal wear, or theft (unless the employer's negligence caused the theft) are excluded.
  • Enforcement through the IWPCA. Prevailing employees can recover through the Wage Payment and Collection Act's private-right structure, including fee exposure under 820 ILCS 115/14.

Illinois is often the second-highest compliance priority after California for multi-state remote employers because the statute reaches the same modern categories — cell phones, internet, required equipment — while giving employers a cleaner written-policy architecture than §2802.

Other affirmative and conditional jurisdictions

Field Code lineage — Montana, North Dakota, South Dakota

Montana (MCA §39-2-701), North Dakota (NDCC §34-02-01), and South Dakota (SDCL §60-2-1) share indemnification language that is textually close to California §2802(a): the employer must indemnify the employee for what the employee necessarily expends or loses in direct consequence of duties or obedience to directions.

These statutes are old Field Code artifacts. Published case law applying them to modern cell-phone and remote-work categories is thin compared with California. The statutory hooks are still broad. Treat them as affirmative-duty jurisdictions, not "federal floor only" states.

New Hampshire — RSA 275:57

RSA 275:57 is a request-based reimbursement rule:

An employee who incurs expenses in connection with employment and at the request of the employer, except expenses normally borne as a precondition of employment, must be reimbursed within 30 days of presenting proof of payment.

Willful violation can bring interest and a civil penalty of up to $1,000 per violation under §275:57, IV. The statute is narrower than §2802 because it requires an employer request and excludes ordinary preconditions of employment, but it is still an affirmative timing duty once a requested expense is proven.

Massachusetts — transportation expenses under 454 CMR 27.04(4)

Massachusetts does not have a §2802-style "all necessary expenditures" statute. The Department of Labor Standards minimum-wage regulation 454 CMR 27.04(4) requires reimbursement of associated transportation expenses when:

  • an employee who regularly works at a fixed location must report to another location, or
  • the employee is required or directed to travel from one place to another during the workday.

Enforcement commonly runs through the Massachusetts Wage Act (MGL c.149 §148), which carries mandatory treble damages and attorney's fees under §150. The regulation is transportation-scoped. It is not a general cell-phone or home-internet mandate.

Iowa — authorized-expense timing

Iowa Code §91A.3(6) requires authorized employee expenses to be reimbursed in advance or not later than 30 days after the employee submits a claim. If the employer refuses all or part of a claim, it must give written justification in the same window. Iowa is a timing and process rule for authorized expenses, not a free-standing "every necessary cost" duty.

District of Columbia — tools and uniforms

D.C. wage-hour rules address narrow categories rather than broad indemnification:

  • 7 DCMR §910: the employer pays the cost of purchasing and maintaining tools required in the performance of the employer's business.
  • 7 DCMR §908: purchase, maintenance, and cleaning of required uniforms or protective clothing, with cash allowances when the employer does not furnish them directly.

Minnesota — deduction caps, not broad reimbursement

Minn. Stat. §177.24, subds. 4–5, limit wage deductions for required uniforms, equipment, and related items, especially when deductions would cut below minimum wage, and require refund of certain deductions at termination. That is a kickback-style protection and equipment rule, not a California-style affirmative reimbursement of all necessary expenditures.

New York and Pennsylvania — agreement-based

New York Labor Law §198-c treats reimbursement for expenses as a "benefit or wage supplement" when the employer has agreed to pay it. Failure to pay agreed supplements on time is enforceable, with criminal misdemeanor exposure for willful failure. It does not create a free-standing duty where no agreement or policy promise exists. Executive, administrative, and professional employees above a weekly earnings threshold are outside the section.

Pennsylvania has no general expense statute. Where a handbook, contract, or policy promises reimbursement, unpaid amounts can be pursued as fringe benefits under the Wage Payment and Collection Law (43 P.S. §260.1 et seq.).

Seattle — local compensation definition

Seattle Municipal Code 14.20 (Wage Theft Ordinance) defines compensation owed to include reimbursable expenses under contract or applicable law. Enforcement includes administrative action and a private right of action with fees and enhanced damages for willful violations. Washington state has no general statewide §2802 analogue; Seattle is the local overlay. SMC 14.34 adds independent-contractor expense-disclosure rules for covered hiring entities.

State-by-state table

Duty values:

  • Yes — broad: affirmative statute covering necessary work expenditures generally.
  • Yes — narrow: affirmative duty limited to named categories (tools, uniforms, transportation).
  • Conditional: timing rule for authorized expenses, agreement-based duty, local overlay, or deduction-cap protection only.
  • No: federal kickback floor only; no general state reimbursement statute located for this survey.
StateDutyNotesCitation
AlabamaNoFederal floor only29 CFR §531.35
AlaskaNoFederal floor only29 CFR §531.35
ArizonaNoFederal floor only29 CFR §531.35
ArkansasNoFederal floor only29 CFR §531.35
CaliforniaYes — broadAll necessary expenditures; interest + attorney's feesLab. Code §2802
ColoradoNoFederal floor only29 CFR §531.35
ConnecticutNoFederal floor only29 CFR §531.35
DelawareNoFederal floor only29 CFR §531.35
District of ColumbiaYes — narrowTools required for the business; required uniforms / protective clothing7 DCMR §§908, 910
FloridaNoFederal floor only29 CFR §531.35
GeorgiaNoFederal floor only29 CFR §531.35
HawaiiNoFederal floor only29 CFR §531.35
IdahoNoFederal floor only29 CFR §531.35
IllinoisYes — broadNecessary expenditures; 30-day submit window; reasonable written caps allowed820 ILCS 115/9.5
IndianaNoFederal floor only29 CFR §531.35
IowaConditional30-day reimbursement of authorized expenses; written refusal requiredIowa Code §91A.3(6)
KansasNoFederal floor only29 CFR §531.35
KentuckyNoFederal floor only29 CFR §531.35
LouisianaNoFederal floor only29 CFR §531.35
MaineNoFederal floor only29 CFR §531.35
MarylandNoFederal floor only29 CFR §531.35
MassachusettsYes — narrowTransportation expenses for off-site / mid-day work travel454 CMR 27.04(4)
MichiganNoFederal floor only29 CFR §531.35
MinnesotaConditionalUniform/equipment deduction caps and termination refunds; not broad dutyMinn. Stat. §177.24
MississippiNoFederal floor only29 CFR §531.35
MissouriNoFederal floor only29 CFR §531.35
MontanaYes — broadField Code indemnification languageMCA §39-2-701
NebraskaNoFederal floor only29 CFR §531.35
NevadaNoFederal floor only29 CFR §531.35
New HampshireYes — broadRequested expenses reimbursed within 30 days of proof; precondition carve-outRSA 275:57
New JerseyNoFederal floor only29 CFR §531.35
New MexicoNoFederal floor only29 CFR §531.35
New YorkConditionalAgreed expense reimbursements enforceable as wage supplementsNY Lab. Law §198-c
North CarolinaNoFederal floor only29 CFR §531.35
North DakotaYes — broadField Code indemnification languageNDCC §34-02-01
OhioNoFederal floor only29 CFR §531.35
OklahomaNoFederal floor only29 CFR §531.35
OregonNoFederal floor only29 CFR §531.35
PennsylvaniaConditionalPromised reimbursements enforceable as fringe benefits under WPCL43 P.S. §260.1 et seq.
Rhode IslandNoFederal floor only29 CFR §531.35
South CarolinaNoFederal floor only29 CFR §531.35
South DakotaYes — broadField Code indemnification languageSDCL §60-2-1
TennesseeNoFederal floor only29 CFR §531.35
TexasNoFederal floor only29 CFR §531.35
UtahNoFederal floor only29 CFR §531.35
VermontNoFederal floor only29 CFR §531.35
VirginiaNoFederal floor only29 CFR §531.35
WashingtonConditionalNo statewide general duty; Seattle treats reimbursable expenses as compensation owedSMC 14.20 (Seattle)
West VirginiaNoFederal floor only29 CFR §531.35
WisconsinNoFederal floor only29 CFR §531.35
WyomingNoFederal floor only29 CFR §531.35

Roster summary (50 states + DC = 51 rows): broad affirmative = California, Illinois, Montana, North Dakota, South Dakota, New Hampshire (6); narrow affirmative = Massachusetts, District of Columbia (2); conditional / local = Iowa, Minnesota, New York, Pennsylvania, Washington/Seattle (5); no general state duty = 38. Secondary marketing lists that say "11 states" usually fold conditional and agreement-based rules into one bucket. This table separates them.

Cell-phone reimbursement

Cell-phone claims are the everyday 2020s surface for expense duty.

  • California. Under Cochran, required personal-phone use triggers a reasonable-percentage reimbursement regardless of plan type or marginal cost. Employers commonly use a fixed monthly stipend rather than litigate percentage. "Required" is practical: calling or texting employees on personal numbers, expecting app alerts, or relying on personal devices without issuing company phones all support the theory.
  • Illinois. Required personal-phone use that primarily benefits the employer falls inside 820 ILCS 115/9.5. Written reasonable caps are expressly allowed if they are not de minimis shams.
  • Field Code states and New Hampshire. Statutory text can support required work-phone costs; published cell-phone case law is thinner than California's.
  • Massachusetts. Transportation-scoped regulation; no general cell-phone statute.
  • Federal-floor states. Only the minimum-wage kickback rule applies. A salaried remote manager with an unlimited plan usually has no federal reimbursement claim.

Remote-work and home-office expenses

Post-2020 remote work turned home internet and equipment into mainstream reimbursement categories in duty states.

Common claimed categories in California and Illinois:

  • Home internet service used for work.
  • Personal cell phone (often already a Cochran issue).
  • Headsets, monitors, keyboards, and required peripherals.
  • Chairs or desks when the employer requires a home workstation rather than providing one.
  • One-time setup stipends versus recurring monthly internet/phone stipends.

Thai is the key published California appellate decision rejecting the "government order caused it" defense. The Williams Amazon settlement ($950,000 final approval, January 23, 2024) shows how remote-internet class claims resolve in practice: per-worker recovery can be modest while litigation cost and fee exposure remain full-freight.

Electricity and heating are theoretically arguable under broad indemnification language but are rarely the lead claim; employers usually fold them into a modest home-office stipend if they address them at all. Employee-chosen co-working fees are generally not reimbursable unless the employer required that workspace.

Mileage as a satellite topic

Personal-vehicle reimbursement is still the highest-dollar recurring category for field and sales work, but it has its own tax and log machinery.

This research owns the duty question: does state law require reimbursement at all? The companion mileage reimbursement research owns:

  • 2026 IRS standard rates (72.5¢ business; 20.5¢ medical/moving; 14¢ charitable).
  • Accountable-plan tax treatment under 26 CFR §1.62-2.
  • Substantiation under 26 CFR §1.274-5.
  • FAVR plans and the 2026 maximum standard automobile cost.
  • Vehicle-specific operational failures (logs, rates above IRS, lump-sum mileage pay).

If your question is "what rate do I pay?" open the mileage piece. If your question is "do I have to reimburse work costs at all in this state?" stay here.

Operational mechanism — what records prevent the failure

Expense reimbursement is a policy-plus-records problem, not a one-time payroll checkbox.

The practical workflow:

  1. Map work location by employee. Duty usually follows where the person works. Remote California or Illinois employees of out-of-state companies still trigger those statutes.
  2. Write the reimbursement policy before the expense happens. Name covered categories: phone, internet, equipment, mileage, tools, uniforms, training travel. In Illinois, the written policy is part of the statutory architecture.
  3. Choose the method. Actual receipts, fixed stipends, or unit rates. Avoid unlabeled salary bumps after Gattuso.
  4. Set submission timing. Mirror Illinois's 30-day window nationally if you want one process.
  5. Keep the audit trail. Expense submissions, stipend amounts, work location by date, and approvals. Time and location records matter because multi-state exposure is a work-location question, not an HQ question.
  6. Separate ordinary reimbursement from benefit-plan design. Ordinary expense reimbursements and stipends are wage-and-hour / tax questions. Folding money into a broader ERISA-governed benefit program can create a different legal analysis that is outside this report.

Clockspot's natural fit is the work-location and time-record half of that workflow: where the employee was working, when, on which job, with which corrections and approvals. The expense policy, stipend ledger, and tax treatment still need their own system of record.

Industry-specific patterns

Outside sales and field service

Daily personal-vehicle use plus personal-phone use is the classic stacked exposure in California and Illinois. Many employers pair IRS-rate mileage with a fixed phone stipend.

Delivery, courier, and misclassified drivers

When drivers are reclassified from contractor to employee, three years of unreimbursed vehicle and phone costs can attach with interest and fees in California. Classification is the gate; reimbursement is the follow-on damages theory.

Home-health and visiting clinicians

Multi-stop personal-vehicle travel plus charting apps on personal phones create dual mileage and device claims. Boundary issues also touch travel-time pay, which is a separate wage-hour topic.

Restaurants and retail

Uniforms, non-slip shoes, and tools recur. Townley limits ordinary occupational shoes; unique uniforms and true protective gear remain higher risk if the employee pays.

Fully remote knowledge workers

Home internet and cell phone dominate. Equipment stipends at hire reduce equipment-claim noise. California and Illinois remain the primary duty states.

Multi-state and remote workers — the work-location rule

Reimbursement law follows the employee's work location, not headquarters or payroll entity.

Concrete scenarios:

  • California remote employee of a Texas company. §2802 applies to California-side work: phone, internet, required equipment, California business miles.
  • Illinois remote employee of a Florida company. 820 ILCS 115/9.5 applies, including the submission window and written-policy architecture.
  • Texas remote employee of a California company. No Texas general duty. Only the federal kickback floor applies unless company policy promises more.
  • Split week: four days California, one day Nevada. California duty attaches to California-side work. Many employers apply the strictest policy nationwide rather than prorate.
  • Traveling rep across California, Illinois, New York, and Arizona. California and Illinois impose affirmative duties for work performed there. New York reaches only agreed reimbursements under §198-c. Arizona has no general duty.

Practical implication: multi-state employers either track jurisdiction by work date or adopt a single national policy set to the strictest floor they actually face.

Recent changes (last 18 months)

  • December 29, 2025 — IRS set the 2026 business standard mileage rate at 72.5¢/mile (IR-2025-128; Notice 2026-10). Satellite rate change for vehicle reimbursement; no new federal expense-duty statute.
  • 2025 — One Big Beautiful Bill Act made permanent the IRC §67(g) suspension of miscellaneous itemized deductions for unreimbursed employee expenses. The "deduct it yourself" path stays closed for ordinary W-2 employees.
  • January 23, 2024 — Final approval of the $950,000 Williams v. Amazon California remote-internet settlement.
  • July 11, 2023 — Thai v. IBM decided (just outside 18 months for some clocks, still the governing remote-work opinion employers cite).
  • No enacted federal statute creates a general employee expense-reimbursement duty as of mid-2026. State-level affirmative duty remains the primary surface.

FAQ

Is there a federal law requiring employers to reimburse business expenses?

No general one. The FLSA protects the minimum-wage and overtime floor through 29 CFR §531.35. If required tools or expenses cut wages below the floor, the employer violates the kickback rule. Above the floor, federal law does not create a positive reimbursement duty.

Which states require expense reimbursement?

Broad affirmative statutes: California, Illinois, Montana, North Dakota, South Dakota, and New Hampshire (request-based with a 30-day pay rule). Narrow or conditional regimes: Massachusetts (transportation), Iowa (authorized-expense timing), D.C. (tools/uniforms), Minnesota (deduction caps), New York and Pennsylvania (if agreed), and Seattle (local). Most other states rely on the federal floor only.

Do I have to reimburse a California employee's personal cell phone if they have an unlimited plan?

Yes under current Cochran doctrine when personal-phone use is required for work. Reimbursement is a reasonable percentage of the bill, not proof of incremental minutes. Most employers use a fixed monthly stipend.

Do remote-work internet costs have to be reimbursed?

In California, Thai supports reimbursement when the expense is actually due to performing the job, even if a public order forced remote work. Illinois's necessary-expenditure statute reaches the same category when use is required and primarily benefits the employer. In federal-floor states, only the minimum-wage kickback analysis applies unless company policy promises reimbursement.

Is the IRS mileage rate required by law?

No. It is an optional tax safe harbor for substantiating vehicle costs. Many employers adopt it because it is simple and tax-clean under an accountable plan. Details live in the mileage research.

Can W-2 employees still deduct unreimbursed work expenses?

Generally no. IRC §67(g) suspension of miscellaneous itemized deductions was made permanent in 2025. A narrow educator expense path remains.

Does headquarters state control multi-state reimbursement?

No. Work location usually controls. A California remote employee of an out-of-state employer is still inside §2802 for California-side work.

Are slip-resistant shoes reimbursable in California?

Not under Townley when the shoes are ordinary occupational footwear that is usual and generally usable in the industry and not part of a unique uniform. Specialty protective equipment remains a different question.

If you discover you've been doing this wrong

  1. Inventory work locations. Build a roster of primary and incidental work locations for every employee and contractor for the lookback window (commonly three years in California; four if a UCL theory is in play).
  2. List unreimbursed categories. Phone, internet, equipment, mileage, tools, uniforms, training travel. Pull bills, mileage logs, stipend history, and policy documents.
  3. Apply the strictest applicable duty. California and Illinois first, then Field Code states, New Hampshire, Massachusetts transportation, and any written promises in New York or Pennsylvania.
  4. Compute principal, then add California interest if §2802 applies. Interest runs from each expense date at 10%. Do not estimate fees as zero; plaintiff's fee exposure is part of settlement math even if you cure voluntarily.
  5. Install the forward policy. Written categories, stipend amounts or rates, submission timing, work-location tracking, and a single national floor if multi-state tracking is too expensive. Document the cleanup payment's period and the forward rule so the cure is not mistaken for ongoing silence.

The bottom line

Federal law is a minimum-wage kickback rule, not a general reimbursement mandate. Affirmative duty is concentrated: California §2802 and Illinois §9.5 dominate modern cell-phone and remote-work risk, with Field Code states, New Hampshire, Massachusetts transportation rules, and a handful of conditional or local regimes filling the rest of the map.

The expensive patterns repeat. Employers treat §2802 as optional. They refuse phone stipends after Cochran closed the unlimited-plan defense. They deny remote-work costs after Thai closed the government-order defense. They hide reimbursement inside salary after Gattuso demanded apportionment proof. They point employees to a tax deduction that §67(g) no longer provides.

The operational fix is boring and effective: write the expense policy, track where people work, reimburse required phone and remote costs in duty states, and treat mileage through a transparent rate with real logs. Vehicle-rate detail belongs in the mileage companion research. The duty map belongs here.

Sources

Federal statutes and regulations

IRS and DOL

Case law

State authorities

Companion research

  • Mileage reimbursement requirements by state: /research/mileage-reimbursement-requirements-by-state

Related

About Clockspot

Clockspot helps small businesses track employee time and keep payroll-ready records. Used in all 50 states since 2007, we focus on getting time and pay right — including the wage-and-hour rules that shape both.

Clockspot helps small businesses keep work locations, clock events, job context, corrections, and approvals in one payroll-ready time record. Expense policies, stipends, and tax treatment still need their own review. See how Clockspot supports field time records.