I’ve always said never mess with an employee paycheck. Especially final paychecks. But do the same rules apply to expense reports? That’s what today’s reader question is all about – expense reimbursements.
I left my employer to take a position in my field. Now they are refusing to reimburse expenses which I incurred during the final month of my employment. My monthly allowance for expenses is $250. Please let me know if there is anything I can do or if they are obligated to pay me. Thank you.
Because we don’t know what the company policy is about expense reimbursement (or if they even have a policy), it’s impossible to directly answer the question. But the reader does bring up a good point about expense reimbursements and can they be viewed the same as pay.
To help us understand the nuances in this situation, I’ve asked Kate Bischoff, JD, SPHR, an employment attorney with the firm of Zelle Hofmann. She’s always offering up great insights on SHRM’s NextChat (Twitter chat) and she graciously agreed to help answer this question. Please remember that her comments should not be construed as legal advice or as pertaining to any specific factual situations. If you have detailed questions, they should be addressed directly with your friendly neighborhood labor attorney.
Kate, are reimbursable business expenses considered part of an employee’s wages?
[Kate] No. Under the Fair Labor Standards Act, specific types of payments are considered part of a wage calculation, but reimbursable business expenses are not part of that equation.
We don’t know if there was a company policy in place regarding expense reimbursement. That raises the question “Should companies have expense reimbursement policies?” Why or why not?
[Kate] Money is a highly sensitive subject for employers and employees alike. Expense reimbursement involves employee money, so clear communication on the procedures and what qualifies for reimbursement can provide some necessary transparency when issues like this come up. Without a clear policy, disputes are bound to happen.
The reader question mentions “allowance” which could be interpreted differently than “reimbursement.” Are the words interchangeable or different in terms of entitlements and payouts?
[Kate] They are different. Usually, ‘allowance’ means that an employee may incur expenses up to a certain threshold each month, year, etc., and any amount over that threshold would be the responsibility of the employee alone. For example, if Sally had an expense allowance of $100 per month for mobile service and she chose a $120 plan, she would have to pay the extra $20 per month and would not be eligible for additional reimbursement. Under an allowance plan, Sally would not have to submit receipts for her mobile service. Allowances give employers a certain amount of consistency for their business expenses while giving the employee options on how they’d like to spend the money.
‘Reimbursement’ generally requires that an employee submit receipts for business expenses, like travel, mobile service, meal and client entertainment expenses. Keeping track of the receipts and filling out expense reporting can be a hassle for employees, but can give employers a certain amount of control over how money is spent. Also, reimbursements can change dramatically month-to-month and year-to-year, so that approach can be unpredictable for companies looking to keep costs low.
The reader also mentions “expenses incurred.” Crazy question – If I purchased something for my company and they never reimbursed me, would I be entitled to keep it?
[Kate] That’s not a crazy question! It is certainly possible, but in the most lawyerly response I’ve got – I’d need more information. The law would need to know what the purchase was, whether it was authorized, and under what circumstances it was made. A court would likely find that you were either entitled to reimbursement for the expense or entitled to keep what you bought.
(Editor’s note: I love the term lawyerly.)
One last question, if a person feels their final paycheck isn’t correct, what can they do?
[Kate] Employees have a couple of options if they think their final paycheck is incorrect. They can and probably should ask for an explanation, in writing, from the employer. If the employer won’t explain or the explanation is unsatisfactory, the employee can contact their state department of labor (or similar agency) that enforces wage payment laws. While state agencies can take some time to process wage claims, this is a no-cost option for employees.
The other option is to bring suit against the employer in court. For many employees, this could be done in conciliation court (if the amount owed is under the dollar threshold that varies by state, county or municipality). Employees do not need an attorney to file a claim, and it’s possible the claim could be resolved quickly. If the employee wants to hire an attorney, the attorney may bring an action in district court and attempt to recover the employee’s attorneys’ fees and costs as well, which most wage laws permit. This option can be costly for the employee initially (i.e., paying the court filing fees) and can take significant time.
Whether it’s an employee’s paycheck or their expense report, the conversation is about money and no one enjoys having their money taken away from them. Organizations need to clearly communicate expense reimbursement and allowances so employees do not have their purchases denied. No one wins in these situations.
Image courtesy of Sharlyn Lauby8