Which States Require Cell Phone Reimbursement?

Several states and jurisdictions require employers to reimburse remote and regular employees for their work-related cell phone expenses or allow tax write-offs for unreimbursed expenses. Each location has specific rules for eligible expenses and may have exceptions for certain workers. The funds provided can be taxable to employees in some cases.

Federal rules on employee cell phone reimbursement

Currently, the U.S. doesn’t have a federal law requiring employers to reimburse employee cell phone expenses. However, the Fair Labor Standards Act (FLSA), which addresses overtime pay and the federal minimum wage, can apply in rare situations.

According to the FLSA, covered employers must reimburse work-related expenses when the cost for workers would result in them making less than the $7.25 federal hourly minimum wage. Cell phone expenses alone are unlikely to cause this since they’d need to bring down a 40-hour minimum wage worker’s pre-tax monthly pay to less than $1,256.

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States and jurisdictions requiring cell phone reimbursement

Eleven states, Seattle and Washington, D.C., have laws, recommendations, or provisions requiring employers to reimburse employee work-related expenses, including cell phones. Cell phone expenses must typically be necessary for performing job duties or required by the employer. While these rules most often impact remote workers, they can also apply to regular employees.

Here are the states and jurisdictions with their rules on employee expense reimbursement.

California

Section 2802 of the state’s labor code requires employers to reimburse employees for any losses or expenditures they experience while performing their direct work duties. This can also apply when personal cell phone use is at the employer’s request.

District of Columbia

Per the Wage-Hour Rules, employers in Washington, D.C., must cover all required tools for employees and their maintenance costs. This may include the cost of the employee’s cell phone and its ongoing service plan.

Illinois

According to the Wage Payment and Collection Act, Illinois employers must pay employees for necessary losses and out-of-pocket expenses directly related to their work duties and services. Employees typically have 30 days to request reimbursement for cell phone plans and other eligible costs based on their company’s policy.

Iowa

Iowa Code 91.A3(6) requires employers to reimburse employees only for authorized work-related expenses they pay for. Unless employees get an advance for the expense, they must receive reimbursement within 30 days of submitting their claim.

Massachusetts

If work-related expenses result in employees making less than the $15 state minimum hourly wage, employers must reimburse them. Plus, General Law Chapter 149, § 148A suggests reimbursing employees for all “unavoidable and necessary” job expenses.

Minnesota

Minnesota Statute 177.24(4)-(5) states that employers only need to compensate employees for certain unreimbursed job-related expenses upon leaving the company. Examples include consumable supplies, equipment, and tools that can’t be used outside that specific company. A personal cell phone likely won’t qualify based on these rules, but employers must clarify eligible expenses in their policies.

Montana

Montana Code 39-2-701 broadly requires employers to reimburse all necessary losses and expenses that employees incur as part of completing their job duties or following employer directions.

New Hampshire

Based on the state’s Revised Statutes Title 23 275:57, employees must be reimbursed for work-related expenses their employers request—unless they’re compensated for them in another way or those expenses are normally covered by employees as part of the employment conditions. Employers must reimburse employees within 30 days of the request.

New York

Employers in this state must compensate employees for all promised wage supplements, benefits, and work-related expenses (including cell phones) in employment contracts. However, New York Labor Law 198-C excludes professional, executive, and administrative workers who earn over $1,300 weekly.

North Dakota

Based on the North Dakota Century Code, 34-02-01, employers must reimburse employees for all expenses and losses directly related to their job duties. However, similarly to Minnesota’s law, cell phones, tools, and other equipment won’t qualify when employees could also use those items outside of employment.

Pennsylvania

While this state doesn’t require reimbursement, it does allow employees to get a state tax deduction for their unreimbursed work-related expenses. Pennsylvania’s Wage Payment and Collection Law also sets a 60-day payment deadline for receiving reimbursements when employers voluntarily offer them.

Seattle, Washington

The Seattle Wage Theft Law makes employers reimburse workers for all necessary and reasonable business-related losses and expenses since they’re considered part of compensation. However, it doesn’t apply to voluntary expenses for convenience, such as a cell phone used for voluntary teleworking. 

Additionally, while there’s no statewide reimbursement law, other Washington employees might qualify to deduct unreimbursed expenses on their state tax returns.

South Dakota

According to South Dakota Statute Codified Law 60-2-114, employers must reimburse employees for necessary expenses and losses directly resulting from performing work duties.

Cell phone reimbursement vs. cell phone stipend

When an employer offers cell phone reimbursement, employees must pay for their costs upfront, report accurate cell phone expenses regularly, and file claims for reimbursement. This requires tracking cell phone use and keeping documentation showing the expenses. Plus, employers must verify and process the claims, which may be for variable amounts each month.

Cell phone stipends involve giving employees a set amount upfront, often monthly or quarterly, to put toward their work-related cell phone costs. They can be more convenient for employees who usually don’t need to submit claims and might enjoy more flexibility in service options. Employers may also find cell phone stipends more predictable to budget for and manage.

Tax implications for employees

Employees who receive cell phone reimbursements or stipends won’t owe income taxes on those funds if the following conditions are met:

• The funds are provided for necessary work-related use that is for the employer’s convenience.
• The reimbursement or stipend isn’t given solely as extra employee compensation.
• The benefit is part of the company’s accountable plan, and the amount provided or reimbursed doesn’t exceed the employee’s actual business expense.

Otherwise, employees must report some or all of the amount as regular income, which is reported on their W-2 forms. For example, if a company provides a $100 monthly cell phone stipend but the actual expense is only $60, the excess $40 may be taxable unless returned to the employer. Employees will also owe taxes on the non-business use portion of a stipend.

See our guide on the taxability of employee reimbursements to learn more.

Other common types of employee reimbursements

In the states covered or others, employers may have to reimburse employees for other work-related expenses. For example, necessary travel expenses for work may qualify along with meal and lodging expenses. Additionally, a few states mandate mileage reimbursement, which makes carefully tracking business mileage important. Employers and employees should check their state and local laws and review company policies on reimbursement.

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