Employee reimbursement requirements — State comparison

The federal Fair Labor Standards Act doesn’t specifically mention employee reimbursement, but it does mention kickbacks, which amounts to the same thing. The FLSA prohibits employers from paying employees less than the federal minimum wage, and requiring employees to pay for work-related expenses can result in a decrease in employee pay.

Fair Labor Standards Act (FLSA)

Minimum Wage

Federal regulatory citation

29 CFR 531.35 — “Free and clear” payment; “kickbacks”

29 CFR 778.217 — Reimbursement for expenses

“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.” If, for example, an employer requires employees to provide tools used in or that are specifically required for the job performance, the employer would violate the FLSA if the cost of such tools that the employee buys cuts into the minimum or overtime wages the employer must pay the employee under the FLSA. According to the U.S. Department of Labor’s Wage and Hour Division, employers must generally provide all tools, supplies, and equipment necessary to perform a job at no cost to employees.

Where employees incur expenses on their employer's behalf or where they are required to expend for the convenience of their employer, they must be reimbursed. Payments made by the employer to cover such expenses are not included in the employee's regular rate (if the amount of the reimbursement reasonably approximates the expense incurred). Such payment is not compensation for services rendered by the employees during any hours worked in the workweek.

State comparison

Some states have laws that specifically require employers to reimburse employees for costs of employment-related expenses. Use the table below to determine whether your state has additional requirements.

The minimum wage in many states is higher than the federal minimum wage. This means that employers must reimburse employees for expenses that bring the employees' wages below the state minimum wage. See here for a state minimum wage comparison table.

Even in states where private employers are not legally required to reimburse employee expenses, it remains good business practice to do so. Employers who do choose to reimburse employee expenses should establish a written reimbursement policy. The policy should, at a minimum, clearly define eligibility; specify reimbursable expenses and the conditions under which they may be reimbursed; and outline procedures for authorization and documentation.