In March 2020, California State University ordered professors to teach classes remotely due to the COVID-19 pandemic. California State University – Los Angeles (CSU) Biology Professor Patrick Krug incurred expenses for a computer and other equipment for his remote work, which CSU refused to reimburse. Krug filed a lawsuit against CSU’s Board of Trustees on behalf of himself and similarly situated faculty, alleging that California Labor Code Section 2802 required CSU to reimburse employees for necessary work-related expenses. He alleged that he also incurred expenses for electricity, postage, internet service charges, use of personal phones for work-related expenses, office supplies, printers, ink and toner, and computer monitors.
Section 2802 requires employers to indemnify (or reimburse) employees for all necessary expenses incurred in the discharge of duties. CSU’s position was that it was exempt from Labor Code provisions that infringe on its sovereign powers as a department of the state.
The trial court agreed with CSU, and Krug appealed. The Court of Appeal (Court) affirmed that Section 2802 did not apply to the CSU. The Court applied the “sovereign powers doctrine” in making its decision.
The Court explained that a traditional rule of statutory construction is that governmental agencies are not included within the general words of a statute unless there are express words to the contrary. The Court also stated this traditional rule applies when subjecting a governmental agency to the Labor Code provision would infringe upon sovereign governmental powers.
The Court ran a three-part test for its analysis. First, the Court looked for “express words” referring to governmental agencies in the statute. The Court determined that there were express references to governmental agencies in Section 2802.
Second, the Court looked for “positive indicia” of a legislative intent to exempt governmental agencies from the statute. The Court stated there was no positive indicia of a legislative intent to exempt government agencies from the statute. There was legislative silence on this matter.
Moving on to the third part of the test, the Court assessed whether applying the statute would infringe upon sovereign governmental powers. This part asks whether the statute would affect the functions and responsibilities the Legislature has given to the public employer. The Court recognized the Education Code grants extensive powers to CSU, as a state agency, to govern affairs related to education. The Court analyzed two provisions of the Education Code vesting CSU with broad authority over the purchase of supplies, equipment, and employee expense reimbursements. Education Code Section 89036 authorizes CSU to enter agreements and prescribe policies and procedures for acquiring supplies and equipment. Education Code Section 89500 authorizes CSU to set matters of equipment allowances and expense reimbursements notwithstanding any other provision of law. The Court found that the expenses Krug sought fell directly within CSU’s authority to set its own rules for equipment allowances and expense reimbursements.
The Court also assessed that a violation of Section 2802 for failure to reimburse necessary expenses subjects employers to attorneys’ fees awards. The Court stated the Legislature is aware of the “stringent revenue, budget, and appropriations limitations affecting all agencies of government” and as a result, courts cannot presume the legislature intended to force governmental agencies to pay large additional amounts from lawsuits, which would “interfere significantly with governmental agencies’ fiscal ability to carry out their public missions.”
In discussing Section 2802 and other types of governmental agencies, the Court noted that a prior case, In re Work Uniform Cases (2005) 133 Cal.App.4th 328, held that Section 2802’s work expense reimbursement requirement did not apply to counties, cities, or the state. However, the Court also stated that it did “not hold that Section 2802 never applies to public employers, only that it does not apply in this case because the Legislature vested CSU with sovereign authority with which Section 2802 would interfere.”
Krug v. Board of Trustees of the California State University, 2023 Cal. App. LEXIS 654.