Is an employer allowed to require employees to pay for business related expenses to be reimbursed later?

UPDATED: Oct 1, 2022

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Is an employer allowed to require employees to pay for business related expenses to be reimbursed later?

I’m curious to learn, if there is any legal rights or regulations that afford a limited liability company operating in AZ the right to force employees to pay for business expenses out of their own pocket after wages have been paid

Asked on April 19, 2019 under Employment Labor Law, Arizona


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

It is perfectly legal--and common--for employees to have to pay their own expenses and then apply for reimbursement. In fact, between my wife and I, for example, we have 60 years of work experience and we have NEVER had the employer pay travel or other business costs upfront--it has always been paid by us, then reimbursed.
As you in fact notice, there is no law requiring reimbursement at all--it would be legal for an employee to simply have to absorb some or all work or business expenses him- or herself. (Though in that case, the employee could, if he or she itemizes his/her taxes, likely take some or all of them as deductions.) Rather, the employer's obligation to reimburse is governed by contract law: if the agreement or understanding, whether written or oral (unwritten) between the employer and employee prior to expenses being incurred is that they would be reimbursed, the employer is contractually obligated to do so, and the employee could sue the employer for "breach of contract" if not reimbursed. (Note, however, that oral agreements can be changed by the employer at will on a forward looking, or not retroactive [i.e. not for expenses already incurred] basis, so long as the employer notifies the employee of the change.)
Requiriing emloyees to pay first, then seek reimbursement, does not violate minimum wage or any other labor law, since the employee is still being paid his/her wages. If they are not reimbursed, then based on the exact circumstances, could be a violation of the FLSA, since in that case, if they reduce earning below minimum, they would run afoul of the law.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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