Which States Require Employers to Reimburse Employee Expenses?

A handful of states require employers to reimburse employees for necessary business expenses. The controlling rule is usually the state where your employee physically works, not where the company is headquartered. Here's what the major mandates look like and how to stay compliant.

States with broad reimbursement mandates

California requires reimbursement of all necessary expenditures or losses an employee incurs while performing job duties under Labor Code § 2802. If you expect employees to use a personal phone, home internet, or vehicle for work, you need a documented reimbursement method. Disputes escalate when your policy is vague or managers apply it inconsistently.

Illinois operates under a similarly broad framework through 820 ILCS 115/9.5, covering all reasonable expenditures related to an employee's scope of work. The statute explicitly prohibits policies that effectively reimburse nothing. If you have Illinois employees, make sure managers understand what they can require people to buy versus what needs prior approval.

States with conditional requirements

Some jurisdictions impose reimbursement duties only in narrower circumstances, typically when an expense is made at your request or authorized in advance. In these states, what you approve and how it's documented matters more than what's casually suggested, and a few conditional mandates are worth tracking:

• Washington, D.C. requires employers to cover the cost of purchasing and maintaining any tools required for the job under 7 DCMR § 910.5. If you have even one employee working in D.C., treat reimbursement as a compliance item, not just an HR preference.
• New Hampshire requires employers to reimburse expenses incurred at the employer's request under RSA 275:57. Your policy should define what counts as "requested," who can approve, and what proof employees need to submit.
• Other states including Iowa, Montana, and North Dakota have narrower provisions tied to specific expense types or wage-and-hour protections. Check your state labor department's website for current guidance.

Written policies and manager training do most of the compliance work in conditional states.

How distributed teams stay compliant

For a 50 to 500 employee company, the operational risk usually comes from inconsistency, not intent. If you have employees in California or Illinois, prioritize those rules first because the mandates are broad and disputes get expensive. Start by confirming each employee's work location (not just their mailing address), then map your policy to every state where you employ people.

From there, build an audit trail that shows what each employee submitted, when it was approved, and when it was paid. The federal floor matters too. Under the FLSA, unreimbursed employer-required expenses become a problem if they push effective pay below minimum wage (see the DOL fact sheet), so sanity-check the math each pay period for hourly employees.

Get your reimbursement policy right the first time

The companies that avoid reimbursement disputes aren't necessarily in easy states. They just have clear policies, consistent enforcement, and a system that documents everything automatically. Ramp can automate receipt collection, reimbursement tracking, and expense management across every state where you employ people, so compliance doesn't fall apart as your team grows.

Frequently asked questions about state expense reimbursement

Does federal law require expense reimbursement?

No federal law requires blanket expense reimbursement. The FLSA only kicks in when unreimbursed expenses push effective pay below minimum wage, which means state laws are where most reimbursement obligations come from.

Which state's rules apply for remote employees?

The controlling law is typically where the employee physically works. If you're headquartered in Texas but have a remote employee in California, California's rules apply.

What expenses do these laws usually cover?

Broad-mandate states cover expenses that are necessary for the job, including cell phones, internet, mileage, and office supplies. Conditional states limit coverage to expenses you specifically required or authorized.

How can we reduce reimbursement disputes?

A written policy with clear categories, submission deadlines, and approval workflows prevents most disputes. Pairing that with automated expense tracking gives you the documentation you need if questions come up during an audit.