Remote Employee Reimbursement Rules by State

When the COVID-19 pandemic forced businesses to go remote in 2020, many had no formal remote work policies in place. Employees suddenly had to rely on personal equipment, internet, and home office setups. They had to purchase new desks, chairs, and supplies out of pocket.

This raised an important question: Who should cover these costs? Remote work is now a long-term reality for many organizations. So, employers need to consider their responsibility for reimbursing employees’ out-of-pocket costs. Some states and local governments have expense reimbursement laws in place. Understanding these regulations is essential to ensure compliance and fair compensation for employees.

So, what expenses must be reimbursed, and how do the laws vary by state? Our guide for HR professionals and business owners breaks it down.

In this blog post, you’ll learn:

Which companies employees have sued for unpaid remote work expenses

How the Fair Labor Standards Act applies to employee expense reimbursement

Which states specifically require remote work expense reimbursement

Remote work expense reimbursement may not be your only requirement. See if your organization must offer health insurance.

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Why is it important to know the rules surrounding remote employee reimbursement?

First, let's discuss why employers need to know remote work reimbursement laws. In 2021 and 2022, some employees sued their employers over unreimbursed remote work costs.

According to the Los Angeles Times¹, employees sued companies like the following for remote work costs:

Wells Fargo
Liberty Mutual Insurance
Visa
Oracle
Bank of America

Workers in California also sued e-commerce giant Amazon for unpaid remote work expenses in 2022 and 2023². Amazon settled the lawsuit in 2024 for nearly $1 million.³

Understanding the state and local rules surrounding remote employee reimbursement can help your business avoid lawsuits by current or former employees.

Are there any federal requirements for remote work reimbursements?

Federal law doesn't require employers to reimburse their employees for work expenses. But, the Fair Labor Standards Act⁴ (FLSA) requires employers to reimburse employees for work expenses if those expenses cause an employee's earnings to fall below the federal minimum wage. This is $7.25 per hour for hourly employees and $684 per week for salaried employees.

Similarly, the law prohibits employers from requiring employees to reimburse the organization for using their employer-provided equipment if it reduces their earnings below minimum wage or overtime compensation.

The Americans with Disabilities Act (ADA) can also affect whether you must reimburse an employee. For example, say you have an employee who works from home as a reasonable accommodation under the law. In that case, you may need to reimburse them for their remote work expenses.

These federal requirements apply to all business expenses. There aren't any federal guidelines on remote work-specific expenses. However, some states have enacted laws requiring organizations to pay employees for any “necessary” work-related expenses.

What is a necessary expense?

Some states require employers to reimburse employees only for necessary expenditures. The laws around what's considered necessary are relatively open to interpretation. State laws generally define necessary as any expense required for the employee to complete their job.

In most cases, the costs wouldn't be considered necessary if an employee chooses to work remotely. But, if your entire organization is remote full- or part-time, those costs would be necessary for your employees to do their jobs.

It's best to check your state's laws regarding what it considers a necessary business expense.

Which states have expense reimbursement laws?

Currently, 12 states, the District of Columbia, and the city of Seattle, Washington have laws about reimbursing employees for necessary work-related expenses. Even fewer states require reimbursement for remote work expenses or business use of a personal cell phone.

Notably, California and Illinois courts have explicitly stated that remote work expenses fall under their states' employee expense reimbursement laws. However, there's still quite a bit of a gray area in other states.

More states are likely to consider adopting remote work and employee reimbursement laws in the future. In some cases, local jurisdictions such as cities and counties may impose their own rules regarding business-related expense reimbursement.

You can use the table below to quickly reference state and local laws about remote work employee reimbursement.

Employee expense reimbursement laws by state

State	Summary
California	Employers must reimburse California employees for “all necessary expenditures or losses”, including those they incurred at the employer's direction. Necessary expenses include internet access and phone bills for remote workers. According to state law, necessary expenditures include all reasonable costs. So, you’ll want to consider things like office supplies, too. California courts have interpreted the law to include a reasonable percentage of remote employees' monthly internet costs or cell phone bills. References: California Labor Code Section 2802⁵
District of Columbia	Employers must reimburse employees for the cost of purchasing and maintaining all necessary tools related to their scope of employment. References: D.C. Municipal Register Title 7 Section 910⁶ and Notice of Final Rulemaking, 41 DCR 187
Illinois	Employers must reimburse employees for all necessary expenses or losses. This includes reimbursement for internet bills and phone bills when employees use them for remote work purposes. Employers can specify what they’ll pay for each type of expense. Employees must also submit requests for reimbursement within 30 days of incurring the eligible expense. References: Illinois Wage Payment and Collection Act, Section 9.5: Reimbursement of employee expenses⁷
Iowa	Employees only need to reimburse expenses they authorize. They must pay out reimbursements within 30 days. If an employer doesn’t pay the reimbursement request, they must provide a written notice explaining why within 30 calendar days. References: Iowa Code 2022, Section 91A.3⁸
Massachusetts	Massachusetts enforces the same protections as federal law: expenses may not reduce an employee's wage below the current state minimum wage. This is $15/hour in 2025. While not required, the Massachusetts Attorney General’s Office recommends reimbursing employees for all expenses that are unavoidable and necessary. References: Massachusetts General Laws Part I, Title XXI, Chapter 149, Section 148⁸
Minnesota	Employers must reimburse employees upon termination for any expenses listed in subdivision 4 of the law, which includes uniforms, purchased or rented equipment, travel expenses for employment (except for commuting), or consumable supplies. After reimbursing employees, employers can require them to return any items. References: Minnesota Statute 177.24¹⁰
Montana	Employers must reimburse all necessary expenses, including those they incurred at the employer's direction or during the discharge of their normal job duties. Because of the broad language of the law, this may include remote work costs such as internet access costs and cell phone bills. References: Montana Code 39-2-701¹¹
New Hampshire	Employers must reimburse employees for expenses connected with their employment and made at the employer's request within 30 days of when the employee presents proof of payment to the employer. References: New Hampshire Revised Statutes Title 23 Section 275:57¹²
New York	Employers must provide reimbursements to employees for expenses if there's an agreement, such as an employment contract, that outlines expense reimbursement. The state considers failing to abide by reimbursement agreements as a misdemeanor. References: New York Labor Law Section 198-C¹³
North Dakota	Employers must reimburse employees for business expenses related to necessary duties or at the employer's direction. Because of the broad language of the law, this may include remote work costs. References: North Dakota Century Code Section 34-02-01¹⁴
Pennsylvania	According to the Pennsylvania Personal Income Tax law, employees can claim any unreimbursed expenses as deductions on their tax returns. References: 43 Pa.Stat. § 260.3
South Dakota	Employers must reimburse all necessary expenses, including those incurred by the employer's direction. References: South Dakota Statute Codified Law 60-2-1¹⁵
Washington	Employee reimbursements are at the employer’s discretion. Unreimbursed employee expenses may be tax-deductible. Seattle: Employers must pay employees all compensation owed to them, including any business expenses. This can include any remote work-related expenses. References: Washington State Department of Labor & Industries ¹⁶ and Seattle Wage Theft Law ¹⁷

Do employers need an expense reimbursement policy?

One of the best ways to handle remote work expense reimbursements is to create a written policy for your organization. A reimbursement policy outlines what reimbursable expenses are for your employees. You'll want to incorporate anything you're legally required to reimburse employees for.

While expense reimbursement policies aren't required, they can help you stay consistent in what you reimburse. Even if your organization is in a state where remote work reimbursements aren't required, it's still a good idea to have an expense reimbursement policy in place. That way, employees know the policy ahead of time.

If you have employees working remotely in different states, you can outline the differences in how you'll reimburse their work from home expenses in your expense policy. You might also want to consider offering a remote work reimbursement or stipend to your employees, whether your state legally requires it or not. This can be a valuable employee perk to help attract and retain employees in the tight labor market.

Other ways to compensate employees for business expenses

Reimbursing employees for office expenses and other costs isn’t limited to taxable reimbursements.

Sometimes the IRS allows businesses to reimburse employees tax-free for business expenses. In order to do so, you’ll need to establish an accountable plan. This requires employees to submit proof of the out-of-pocket costs being work-related. Proper documentation includes receipts, mileage logs, and expense reports that prove it's for the business. IRS Publication 15-B outlines which expenses are eligible. This can include travel, meals, lodging, and transportation expenses.

Additionally, you can offer your employees a per diem for some costs, like meals and travel. These federal per diem rates generally eliminate the need for employees to submit receipts for reimbursement. There are also standard mileage rates for reimbursement.

Offering remote work stipends

Whether or not you're required to reimburse employees for remote work costs, doing so can increase employee morale. Employees may also consider reimbursement an employee benefit. When looking to retain your remote workers and hire new remote talent, offering fringe benefits like a remote work stipend to your employees can help you compete with organizations that don't provide a remote work benefit.

According to a 2022 Reuters article¹⁸, several clients of Ackermann & Tilajef settled cases with their employers over unreimbursed remote work expenses. Many of these organizations agreed to give remote workers a monthly stipend of up to $83.

With a remote work stipend, you give your employees an allowance for their home office and internet costs. Because remote work employee stipends are taxable income, you must report them on employees' W-2s for their income taxes.

Employee stipends allow your remote workers to cover their employee expenses quickly and flexibly, all while satisfying state requirements for remote work expenses. They can make a great addition to your employee compensation packages.

Conclusion

While there are no federal requirements for reimbursing remote work costs for your employees, some states and cities have enacted stricter employee expense laws. To ensure your organization has an action plan for remote workers, it is best to have a written employee expense reimbursement policy in your employee handbook and an established accountable plan.

This blog post was originally published on March 23, 2022. It was last updated on March 20, 2025.

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Chase Charaba

Chase Charaba is the Content Marketing Manager at PeopleKeep, where he brings three years of expertise in HRAs and health benefits. Having personally used both QSEHRA and ICHRA as an employee, Chase offers a unique perspective on how these solutions empower small employers and their teams. He's written extensively on health benefits, contributing to his career total of more than 350 blog posts across diverse industries. With experience in both digital marketing agencies and in-house teams, Chase combines strategic insight with creative storytelling. Outside of work, he’s an aspiring fiction author, landscape photographer, and small business owner.

Remote employee reimbursement rules by state