Dispute Over an Expense Reimbursement Contract? Five Factors to Consider

Are you a Wisconsin- based employee with a dispute (or potential dispute) with an employer about an expense reimbursement contract? If so, before you take action or communicate with the employer about the dispute, below are five factors to consider.

1. Review the contract’s terms, including terms about timing and key dates, before taking action.

Many expense – reimbursement contracts have terms that specify important dates and/or time periods. For example, a contract may say that if the employee resigns within one year of his employment start date, then he must reimburse the employer 100% of the expenses it paid relating to the employee’s hire, travel and relocation. Or a contract may say if the employee resigns during a given time frame (e.g. at a time between Jan. 1 and Jun. 30, 2019), then he must reimburse 50% of the employer’s expenses, or if he resigns during a later time frame (e.g. between Jul. 1 and Dec. 31, 2019), he must reimburse 25%.

Sometimes, the terms are not clearly defined or ambiguous on their face. For example, a reimbursement contract may say the employee has a reimbursement obligation if he resigns “before a one-year period”, but may not specifically define the date that “one year” has ended. Such ambiguous terms can raise doubts when, exactly, the one year period begins and ends. Is it one year after the date the last party signed the contract? One year after the date the employee accepted the job offer? One year after the date the employee first started employment at the employer’s building?

An employee with a reimbursement contract should review and understand the contract’s terms– including its terms about important dates and timing– before he takes action, e.g. before he gives notice of resignation on a given date. A close review of the contract, including terms about key dates and timing, can help the employee be aware of important timing considerations and perhaps avoid a very costly mistake. For example, it may help him avoid giving notice of resignation to occur a day before a date when reimbursement obligations would have vanished under the contract had he stayed employed just a day longer.

2. Know that some contracts and/or their reimbursement terms are invalid under Wisconsin law; don’t assume the employer’s legal interpretation is correct.

Employers act as if the reimbursement contracts they drafted– and their interpretations of their contracts– are unquestionably valid under the law. But in reality, some reimbursement contracts are invalid under Wisconsin law standards.

Only a Court can determine if a given contract is valid or invalid. However, an employee can have a lawyer assess the likelihood or odds a given contract would be found invalid by a Court, via the lawyer reviewing that contract and comparing it to applicable legal standards, etc.

If an employee’s lawyer reviewed a reimbursement contract and saw legal problems with it and felt a Court would likely consider it invalid, the lawyer’s opinion to this effect could be conveyed to the employer, and could cause the employer to reduce or withdraw its demand for the employee’s expense-reimbursement payment.

It is common in my experience to see problems in the language of an expense – reimbursement contract that present risk to the employer that the contract could (if a legal action arose) be determined by a Court to be invalid. There are some legal issues that, if present in a given contract, could cause a Court to decide the whole contract is invalid. In other instances, there are problems with a contract that are likely to cause a Court to decide only a portion of its terms, or only a portion of money (less than what the employer demands) are legally-valid or owed.

If you have a reimbursement contract with one or more of the following attributes, it may be legally-vulnerable for the employer, and you should consider having an employee rights lawyer assess it further:

  • If the contract was drafted by the employer and has vague or ambiguous terms the employer is now interpreting in its favor, to your financial detriment.
  • If the contract defines types of expenses or time frames, etc., and the employer is seeking reimbursement of types of expenses that are not of the type the contract defines, or were not incurred during defined contractual time frames, etc.
  • If the contract has terms that say the employer may dock your wages (paychecks) for reimbursement money the employer decides you owe.

3. Request proof from the employer for the expenses at issue; make sure they’re legitimate expenses and of a type reimbursable under the contract.

A reimbursement contract may specifically state the employee has a right to request the employer give her proof of the expenses at issue, so she can verify they were in fact paid and in fact were proper for the employer to have paid for her hire and relocation, etc.

Such proof can include an itemization of expenses that specifies exact expenses’ dates and amounts of payment, to whom they were paid, for what purpose, etc. Proof can also include receipts or bank entries from the employer, or other documents that prove and/or describe how various expense payments were made for given purposes, etc.

Whether or not your contract says you can request the employer provide you such proof of the expenses’ legitimacy, it is a good idea for you to make such a request.

If an employer provides you an itemization or other proof of expenses, you should carefully review that documentation, to make sure the described expenses appear legitimate and appropriate. As an initial matter, you may discover that there are erroneous entries or amounts stated for given expenses, and find the employer has overstated the value of expenses it is asking you to reimburse.

You should also compare those documented expenses (as described in the documentation) to the terms and descriptions in your reimbursement contract. Are those expenses, for which the employer demands reimbursement, actually of the type and nature for which the contract requires reimbursement?

If there’s any problem with the expenses’ legitimacy and/or legality under the contract, it is good that you identify any such issues before communicating with the employer about potential reimbursement, and certainly before paying for reimbursement.

4. You may have legal leverage, for your reimbursement dispute, based on factors outside the reimbursement contract and/or that you may not have considered.

Above I reference some legal issues with a given reimbursement contract or its terms that, in a reimbursement demand or dispute situation, can possibly raise legal risks for an employer and/or leverage for the employee.

Aside from the content or issues in any given contract, there may be external factors or laws that provide potential leverage for the employee.

For one, an employee who is contemplating resignation and related reimbursement contract issues, may be subject to unlawful activities by his or her employer that prompted the plans for resignation in the first place. For example, the employee may be resigning because the employer failed to pay the employee a bonus or commission that was (in the employee/lawyer’s view) owed under WI wage or contract laws, or because the employer harassed or discriminated against the employee in arguable violation of WI or Federal discrimination laws.

If an employer arguably violated laws with respect to the employee– and arguably owes the employee legal damages (money) due to lost wages or discriminatory acts, etc.– then those matters may serve as counter-leverage in a negotiation with an employer seeking expense-reimbursement money from the employee.

If a negotiation occurs with an employee about any legal issue, it is likely best that any and all other potential legal issues are also considered by the employee (and employee’s lawyer, if applicable). That way, the employer’s reimbursement demand is not discussed in a vacuum and the employee’s potential legal rights and potential damages are also part of the discussion, leveraging and/or settlement agreement that may occur.

5. If you decide to get a lawyer’s advice about a contract reimbursement dispute, it is best to do so before you take action or communicate with the employer.

As referenced above, an employee rights lawyer can review an expense reimbursement contract, assess the circumstances of a reimbursement request or dispute, and possibly identify deficiencies with the contract or the employer’s legal position. As a threshold matter, the lawyer may tell the employee some important things not to do, e.g. not to resign before a given date (because of bad consequences per the contract’s terms, etc.).

Also, the lawyer may opine that the employer’s position has legal weaknesses. If that is the case– e.g. say the lawyer opines a Court would likely find the contract invalid– then that opinion could be helpful for the employee to know before communicating or trying to negotiate with an employer about an expense reimbursement demand.

The employee could retain the lawyer to do the communicating or negotiating.

Lawyers are better at conducting communications and negotiations about contracts than are employees and employers. Most employers know this and have lawyers (or promptly retain lawyers) to assist with any reimbursement-contract disputes that arise for them.  Sometimes, employers’ lawyers are behind the scenes and, unbeknownst to the employee they’re in a dispute with, are monitoring and advising the employers’ personnel about what to say or write to the employee. Employees, too often, try to tackle contract-related communications and negotiations on their own, and are thus at a disadvantage compared to the employers, who typically have attorney help accessible.

The more an employee communicates with an employer about a contract dispute– especially written or emailed communication– the more risk the employee incurs of diminishing or eliminating legal rights or options he or she may have had. For example, an employee may send off an email to the employer, about a reimbursement dispute issue, in which he inadvertently agrees to new contractual terms, or agrees to a contractual modification, that are against his interests and/or waive legal rights he’d had (to reduce or eliminate reimbursement money owed) that he never knew he had.

While a lawyer could potentially help an employee at any point in time– even after the employee has communicated at length with the employer– the earlier the employee consults with the lawyer for advice, the better. If a competent employee rights lawyer is retained to communicate directly with the employer’s representative, the lawyer’s written communications will likely be very precisely worded to include legal standards, citations, etc. that are applicable to the contract dispute and explain the employee’s legal rights and leverage.

With all that said, there can be potential downsides to securing a lawyer. For one, a cost/benefit comparison may rule out hiring a given lawyer in a given situation, e.g. it would be disadvantageous to hire a lawyer with a high fee rate for a low-dollar expense dispute. In an article here, I discuss in more detail various factors one may consider in deciding whether to hire a lawyer, and good questions to ask a prospective lawyer to ensure they are competent and likely to provide cost-effective representation.

In general, I can say the potential dollar-savings in employee reimbursement disputes are often much higher than typical lawyer-fee values. (My employee-clients in such matters usually wind up with reimbursement savings amounts that are significantly higher than their fee payments, i.e. they usually wind up ahead). If an employee rights lawyer is willing to provide a free initial evaluation, as I am and others are too, then you have nothing to lose in at least contacting such a lawyer for initial feedback about your expense reimbursement dispute.

Conclusion

If you are an employee with concerns about an expense-reimbursement contract or dispute, I hope the five factors above are of help to you.

 

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