Two months ago, this column addressed a California Court of Appeal ruling in Thai v. International Business Machines Corp. that Labor Code Section 2802 required a private employer to reimburse its employees for equipment employees purchased to perform their work remotely, triggered by the state’s COVID-19 pandemic stay-at-home order.
Late last month, a different California Court of Appeal ruled in Krug v. Board of Trustees that Patrick Krug, a biology professor at California State University’s (CSU) Los Angeles campus, and other CSU instructors were not entitled to reimbursement for the cost of computers and related expenses they incurred when CSU ordered its instructors to begin teaching remotely in March 2020 due to the pandemic.
CSU had rejected Krug’s request for reimbursement. Before Krug filed his lawsuit, the state Division of Labor Standards Enforcement (DLSE) told him CSU had unlawfully denied his request.
But the trial court disagreed with Krug (and, by extension, the DLSE) and the appellate court affirmed dismissal of his suit. The difference between a private sector worker’s right to work-related reimbursement and a CSU faculty member’s right to work-related reimbursement in this specific context turned on CSU’s broad statutory authority to make its own equipment reimbursement policies, exempting CSU from the general obligations imposed by section 2802.
The general rule of employee reimbursement
Labor Code section 2802 generally requires employers to reimburse their employees “for all necessary expenditures” their employees incur “in direct consequence of the discharge of” their duties. In Thai, the California Court of Appeal held that Section 2802 required IBM to reimburse its employees for expenses incurred to perform their duties from home, even though the state, not IBM, imposed the work-from-home mandate.
Krug, however, was seeking reimbursement from CSU, a government agency. Under the “sovereign powers” principle, a court asks three questions in deciding whether a generally applicable statute applies to a government agency such as CSU. First, does the statute expressly apply to government agencies? If not, are there positive indications the Legislature intended to exempt public agencies from the statute? If not, will applying the particular statute infringe on the agency’s power to govern itself? If applying the particular statute will not infringe on the agency’s power to govern itself, the statute will apply to the agency.
Section 2802 does not on its face apply to public employers. But there also is no positive indication the legislature intended to exclude public employers from the statute. The decisive question, then, was whether requiring CSU to reimburse its faculty for home-office expenses resulting from the pandemic would infringe on CSU’s powers as a government agency? The court of appeal held that it would. Section 2802 therefore could not apply to Krug’s reimbursement request.
Applying general reimbursement law would infringe on CSU’s right to set reimbursement policies
Section 89036 of the Education Code gives CSU trustees broad authority to “prescribe policies and procedures for the acquisition of services, facilities, materials, goods, supplies, or equipment.” Section 89500 gives the trustees the authority, “[n]otwithstanding any other provision of law,” to set rules for CSU employees related to, among other things, “equipment allowances.”
The court of appeal concluded that to apply Labor Code section 2802 to require CSU to reimburse its employees for office-work expenses under these circumstances would curtail CSU’s “sovereign governmental powers in two ways. It would limit the discretion vested in CSU to establish policies for employee reimbursement for necessary expenses, and would potentially divert limited educational funds from CSU’s core function to pay not only legal judgments but potentially huge additional amounts [of legal fees and litigation costs] to outside parties.”
Ruling limited
The court’s holding may not apply to other public employers lacking CSU’s “vested authority to set the for employee expense reimbursement.” The court also emphasized that section 2802 may even apply to CSU in other contexts. The court held only that section 2802 “does not apply in this case because the Legislature vested CSU with sovereign authority” over rules related to equipment purchasing “with which section 2802 would interfere.”
The narrow, fact-specific exception to employee reimbursement applied in Krug only reinforces the general rule of employee reimbursement applied in Thai.
Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. [email protected]
