Plaintiffs are increasingly seeking to apply California Labor Code obligations to public employers. Some efforts have been more successful than others. In the recent case of Krug v. Board of Trustees of the California State University, the California Court of Appeal for the Second District ruled that the California State University ("CSU") was not required to reimburse a professor for remote teaching expenses under Labor Code section 2802, because applying this statute would impair CSU's sovereignty.

Overview

In March 2020, at the beginning of the COVID-19 pandemic, CSU ordered its faculty to teach remotely. The plaintiff, a CSU professor, tried to retrieve his CSU-provided computer and printer to bring home, but he was denied access to the workplace office. As a result, the professor replaced these items and asked the CSU for reimbursement. However, CSU refused to reimburse him.

The professor sued CSU, claiming that he and other similarly-situated faculty were entitled to reimbursement under California Labor Code section 2802 for home-office expenses which were reasonable and necessary to perform remote work duties. Labor Code section 2802, subdivision (a) states that "an employer shall indemnify [an] employee for all necessary expenditures…incurred…in direct consequence of the discharge of his or her duties."

The trial court disagreed with the professor on the basis that a governmental agency is generally exempt from Labor Code statutes that do not expressly apply to public employers. The professor disagreed and appealed.

The Court's Decision

To determine whether CSU was excluded from Labor Code 2802, the appellate court applied the three-part test for determining whether the sovereign powers cannot overcome a generally applicable Labor Code provision:

Part 1: Does the statute contain "express words" referring to governmental agencies;
Part 2: If not, does the statute contain any "positive indicia" of a legislative intent to exempt the agency from the statute;
Part 3: If no such indicia appears, does applying the statute infringe upon sovereign governmental powers.

In analyzing the first part of the test, the court found that section 2802 contained no express words referring to governmental agencies. As for the second part of the test, the court similarly found there was no "positive indicia" to exempt CSU from the statute's reach.

The court then analyzed whether applying the statute to CSU would result in an infringement of sovereign governmental powers. The court determined that CSU was a state agency that did have sovereign powers – namely, to produce public university-level education. In order to provide this education, the court found that the Education Code gave CSU trustees broad authority to proscribe the policies and procedures for acquiring supplies and equipment, including setting the rules regarding equipment allowances. As a result, the court found that applying section 2802 to CSU in this case could infringe on CSU's sovereign governmental powers.

Specifically, the court determined that if section 2802 were applied to CSU, it would limit the discretion vested in CSU to establish employee expenditure reimbursement policies. In addition, the court found that if CSU were ever held liable under section 2802, it would potentially result in CSU having to divert funds from their limited education budget, to paying legal judgments and attorney's fees to outside parties. According to the court, this would be an obvious interference with the CSU's ability to exercise its sovereign power to provide public education. Therefore, the court held that under the facts of this case, section 2802 did not apply to CSU.

What Does This Mean for Public Employers?

The court confirmed that section 2802 did not apply to CSU, due to CSU's vested sovereign authority to set the terms for employee expense reimbursement. However, it emphasized that in other contexts, section 2802 may apply to government agencies: "We do 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."

As a result, public agencies may want to consult with counsel to mitigate any potential risks created by their reimbursement policies and procedures. We can expect plaintiffs to continue testing the applicability of various Labor Code provisions against California public employers.