Federal Labour Program provides guidance on reimbursement of work-related expenses

A new federal Interpretations, Policies, Guidelines (IPG) document from the Federal Labour Program provides further clarification on reimbursement of work-related expenses as required by the Canada Labour Code. 

As of July 9, 2023, new regulations regarding expense reimbursement will come into effect, pursuant to section 238.1 of the Canada Labour Code. In a previous post, we outlined the general requirements of those regulations. 

This update summarizes “IPG-120- Reimbursement of work-related expenses,” which provides further clarification as to which expenses are subject to reimbursement. In order to be reimbursed, an expense must meet the four eligibility criteria:

i. The employee does not have to pay the expense as per a written agreement or collective agreement;

ii. The employee must have paid the expense out-of-pocket;

iii. The expense must be work-related; and

iv. The expense must be reasonable.

Eligibility criterion 1: The employee does not have to pay the expense

Whether an employee is responsible for an expense depends on whether there is a relevant agreement with the employer.

For non-unionized employees, an expense is not reimbursable when there is a written agreement that requires the employee to pay the expense. For example, if a written agreement requires the employee to pay for the cost of replacing a lost work uniform, the employer will not be required to reimburse the employee for that expense. 

For unionized employees, an expense is likewise not reimbursable when a collective agreement requires the employee to pay the expense. For example, a collective agreement may require employees to pay for eye exam fees to get safety glasses to wear on the job. 

If there is no such agreement requiring the employee to pay for the expense, the employer may be responsible for reimbursing the expense incurred. 

Eligibility criterion 2: The employee paid the expense out-of-pocket

An “out-of-pocket” expense is an expense paid with an employee’s own money on behalf of their employer. 

When an employee pays for an expense with their own money (for instance, by using their personal credit card) that expense is eligible for reimbursement. 

In contrast, if an employee makes a payment with an allowance or with a business credit card, the expense is not out-of-pocket and therefore not reimbursable.

Eligibility criterion 3: The expense is work-related

Various factors are considered when determining whether an expense is “work-related,” including, but not limited to:

• whether the expense is connected with the employee’s performance of work, such as travel expenses to a business meeting that is somewhere other than the usual workplace;
• whether the expense was incurred to satisfy a requirement for the employee’s work imposed by an occupational health or safety standard, such as the costs of personal protective equipment; and,
• whether the expense was incurred for a legitimate business purpose, rather than for personal use or enjoyment, such as the costs of business calls (though not personal calls) on a mobile device.

Eligibility criterion 4: The expense is reasonable

Similar factors to the third criterion are considered when determining whether an expense is “reasonable,” including, but not limited to:

• whether the amount of the expense is reasonable and does not incur additional unnecessary expense. For instance, should an employee opt to travel in business class, a more expensive option than what their employer authorizes, the travel expense is less likely to be reasonable;
• whether the expense was authorized by the employer in advance. This may be communicated verbally or in writing (including via text massage and other electronic means) before the expense is incurred. For instance, authorizing an employee to stay overnight in a hotel before the employee travels is likely to be reasonable; and 
• whether the expense was incurred by the employee in good faith. While determination of a good-faith expense is contextual, it will generally be where the employee acts honestly without the intention to deliberately deceive their employer. For instance, should an employee willingly opt to stay in a hotel suite, a more expensive hotel room than what their employer allows, the expense will not be incurred in good faith and will therefore not be reimbursable.

Time limits for reimbursement

When the above criteria are satisfied and an employer is required to reimburse an expense, it must do so within specific time frames. This again depends on the content of the employment agreement.

For unionized employees, the time limit for reimbursement is that specified in the collective agreement or within 30 days after the employee submits their expense claim to the employer, if there is no agreement.

For non-unionized employees, the time limit is that specified in the written agreement or within 30 days after the employee submits their expense claim to the employer, if there is no agreement.

The author would like to thank Isabelle Deschenes, law student, for her assistance in preparing this legal update.