When refusal to reimburse expenses becomes illegal

On Behalf of | Sep 19, 2019 | employment law | 0 comments

There may be times when an employee makes out-of-pocket purchases related to work. In some states, the employer is required to pay back the employee for the expenses. However, the Texas Workforce Commission explains that in the Lone Star State, the law favors employers when it comes to the decision to reimburse the expenses.

So, for example, employees who are sent to a required training may have to spend their own money on travel expenses and meals, and the employer will have the choice of whether to reimburse these. This is not true without exception, though. It is illegal for the company to refuse reimbursement when the employee’s expenditures deducted from the amount of his or her salary would result in a rate of pay lower than the state’s minimum wage, which is currently $7.25 per hour.

If companies do reimburse some expenses, the TWC recommends that they take the following steps to avoid confusion about what expenses they will or will not reimburse:

  • Create a policy listing specific expenses eligible for reimbursement and those not eligible; have employees sign it
  • Require authorization for larger expenses
  • Require employees to submit receipts
  • Have expense reimbursement requests audited
  • Create a procedure for disciplining employees who violate the policy

Because Texas is an at-will employment state, the employer has the right to change the policy.

Chron.com notes that the IRS encourages employers to reimburse employees’ work-related out-of-pocket expenses. Employers must either offer a per diem rate plan or account for every expenditure in order to claim the reimbursements as business expenses and receive a tax deduction.