Reimbursement of work-related expenses - IPG-120

Effective date: July 9, 2023

Subject

This Interpretations, Policies and Guidelines (IPG) intends to clarify and provide guidance on the application of section 238.1 of Part III of the Canada Labour Code (Code) covering reimbursement of work-related expenses.

Date of application

Reimbursement of work-related expenses applies to expenses incurred on or after the coming into force date of July 9, 2023.

Interpretations

For the purposes of this IPG:

“Out-of-pocket” - work-related expenses an employee pays for using their own money on behalf of an employer
“Cash advance” - money an employer advances to an employee to pay for work-related expenses
“Deductions” - amounts withheld from wages or other amounts owed to an employee

Overview

Reimbursement of work-related expenses requires employers to reimburse employees:

for reasonable work-related expenses paid out-of-pocket by the employee
within specific time limits

An expense must be reimbursed by the employer when it meets all eligibility criteria. The facts of each situation must be carefully considered when deciding if an employer has to reimburse an expense.

Eligibility criteria

To be eligible for reimbursement, an expense must meet the following 4 eligibility criteria:

The employee does not have to pay the expense as per a written agreement or collective agreement
The employee must have paid the expense out-of-pocket
It must be work-related, and
It must be reasonable

Eligibility criteria 1 - The employee does not have to pay the expense

An expense is not eligible for reimbursement when:

a written agreement between a non-unionized employee and their employer requires the employee to pay the expense
- Example: A written agreement specifies that a non-unionized employee is required to pay for:
  - the replacement cost of lost uniforms
  - penalties incurred for non-cancellation of a hotel reservation
a collective agreement or written agreement between a unionized employee’s trade union and the employer requires the employee to pay the expense
- Example: A collective agreement specifies that employees are required to pay for:
  - safety footwear costs in excess of their annual safety footwear allowance
  - eye exam fees to get safety glasses

When an employee has to pay an expense, the employer can only deduct the expense from the employee's wages when the deduction meets the requirements of the Code. For further information about permitted deductions from wages refer to IPG-060.

Eligibility criteria 2 – The employee paid the expense out-of-pocket

To be eligible for reimbursement, the employee must have paid the expense out-of-pocket.

When an employee does not pay the expense, with their own money, the expense is not eligible for reimbursement. For example, payment of expenses with:

Allowance paid to employee
Cash advance
Business/corporate credit card that is owned by the employer
Business/corporate purchasing card that is owned by the employer
Fuel card that is owned by the employer

Eligibility criteria 3 – The expense is work-related

To be eligible for reimbursement, an expense must be work-related.

The Canada Labour Standards Regulations (Regulations) list 5 factors to consider when determining whether an expense is work-related. When reviewing the factors:

all factors must be assessed as a whole and weighed based on the specific facts of the case
some factors may not be relevant, nor will they all carry the same weight
some facts may support that the expense is work-related and other facts may not

Factors to consider	Interpretation
Whether the expense is connected to the employee’s performance of work	Expenses connected to the employee’s performance of work are more likely to be work-related. Example: Travel expenses (business meeting in a different location from the usual workplace)
Whether the expense enables an employee to perform work	Expenses that enable an employee to work are more likely to be work-related. Example: Mandatory training
Whether incurring the expense is required by the employer as a condition of employment or continued employment	Expenses required by an employer as a condition of employment or continued employment are more likely to be work-related. Example: Enhanced security clearance
Whether the expense satisfies a requirement for the employee’s work imposed by an occupational health or safety standard	Expenses related to an occupational health or safety standard are more likely to be work-related. Example: Personal protective equipment
Whether the expense is incurred for a legitimate business purpose and not for personal use or enjoyment	Expenses incurred for legitimate business purposes are more likely to be work-related. Example: Mobile phone costs for business calls would likely be considered work-related. Mobile phone costs for personal calls would not be work-related

Eligibility criteria 4 – The expense is reasonable

To be eligible for reimbursement, an expense must be reasonable.

The Regulations list 8 factors to consider when determining whether an expense is reasonable. When reviewing the factors:

all factors must be assessed as a whole and weighed based on the specific facts of the case
some factors may not be relevant, nor will they all carry the same weight
some facts may support that the expense is reasonable and other facts may not

Factors to consider	Interpretation
Whether the expense is connected to the employee’s performance of work	Expenses connected to the employee’s performance of work are more likely to be reasonable. Example: Uniforms required by the employer
Whether the expense enables an employee to perform work	Expenses incurred to enable an employee to work are more likely to be reasonable. Example: Road transportation expenses such as fuel or tolls incurred by transport truck drivers
Whether the expense is incurred at the request of the employer	Expenses an employer requests or directs an employee to incur are more likely to be reasonable. Example: Towing fees an employer instructs an employee to pay after a company vehicle breaks down
Whether any amount of expense is incurred beyond the amount necessary to enable the performance of the work	Expenses exceeding the amount required to perform the work are less likely to be reasonable. Example: An employer’s travel policy authorizes economy class, but the employee opts for business or premium class. This expense would be less likely to be reasonable
Whether the expense is one that is normally reimbursed by employers in similar industries	Expenses that are normally reimbursed by employers in similar industries are more likely to be reasonable. Example: Fuel, tolls, or weigh-scale fees are more likely to be reasonable in the road transportation industry
Whether the employer authorized the expense in advance	An employer can authorize an expense in writing or verbally. Written authorizations could include employer policies or other agreements if the expense is within the scope of the policy or agreement. Example: An employer authorizes an employee to stay overnight in a hotel by email, text message, or other electronic means before the employee travels
Whether the expense is incurred by the employee in good faith	An employee incurs an expense in good faith when they are honest and do not intend to deliberately deceive. Example: An employer authorized an employee to stay overnight in a hotel. Contrary to the employer's travel policy, the employee stayed in an executive suite even though standard rooms were available. As the employee did not incur the expense in good faith, it is less likely to be reasonable
Whether the claim includes documentation, such as a receipt or invoice, that indicates that the expense was incurred	Expenses where a claim was submitted to the employer with supporting documentation are more likely to be reasonable. Supporting documentation provided to an employer includes both paper and electronic formats. The absence of documentation does not prove that an expense is not reasonable. Example: Receipts/invoices

How employees can claim expenses

Section 253.2 of the Code requires employers to give employees a written employment statement. The statement must include information about how the employee can claim reimbursement of reasonable work-related expenses.

Time limits for reimbursement

Employers must reimburse reasonable work-related expenses within specific time limits.

For unionized employees, the time limit is:

specified in a collective agreement or written agreement, or
if there is no agreement, within 30 days after the employee submits their expense claim to the employer

For non-unionized employees, the time limit is:

specified in a written agreement, or
if there is no agreement, within 30 days after the employee submits their expense claim to the employer

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Date modified:: 2023-06-23

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