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When the Covid pandemic struck, the California State University (CSU) directed that instruction be provided remotely. Patrick Krug did so but was denied access to his workplace office to retrieve his CSU-provided computer and printer.To provide such instruction, Krug, a biology professor at CSU-Los Angeles, incurred expenses which CSU refused to reimburse for a computer and other equipment.

CSU took the position that Labor Code section 2802, subdivision (a), which obligates an employer to “indemnify [an] employee for all necessary expenditures . . . incurred . . . in direct consequence of the discharge of his or her duties,” did not apply to the school because such application would infringe on its sovereign powers as a department of the state.

Krug asked the Department of Industrial Relations (DLSE) whether the school’s non-reimbursement policy was lawful. The DLSE responded that it disagreed with CSU’s interpretation of section 2802.

Krug filed this class action complaint, alleging a single claim for reimbursement of home-office expenses for himself and other CSU faculty employees under section 2802. He later amended to add a claim under the Private Attorneys General Act (PAGA) stemming from the same reimbursement violation. He alleged he incurred necessary business expenses for electricity, postage, internet service charges, use of personal phones for work-related purposes, office supplies, chairs, computers, printers, ink and toner, and computer monitors required to perform his work.

CSU demurred, arguing that as a department of the state it enjoys broad exemption from Labor Code provisions that infringe on its sovereign powers. Krug appeals from a judgment of dismissal entered after the trial court sustained CSU’s demurrer without leave to amend.

The Court of Appeal affirmed the trial court in the Published case of Krug v. Board of Trustees of the Cal. State Univ – B320588 (August 2023).

On appeal, Krug contends that section 2802 applies to CSU.

A traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute.” (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1192.

Thus, the Labor Code applies only to private sector employees unless a Labor Code provision is “specifically made applicable to public employees.” (Campbell v. Regents of Univ. of California (2005) 35 Cal.4th 311, 330; California Correctional Peace Officers’ Association v. State of California (2010) 188 Cal.App.4th 646, 652-653; Nutter v. City of Santa Monica (1946) 74 Cal.App.2d 292, 301.)

Specifically in the context of reimbursement for work expenses (uniform costs), section 2802 does not apply to counties, cities, or the state. (In re Work Uniform Cases (2005) 133 Cal.App.4th 328, 332, 339, 345.)

But this maxim of construction excludes governmental agencies from the operation of general statutory provisions only if their inclusion would result in an infringement upon sovereign governmental powers.  “Where . . . no impairment of sovereign powers would result, the reason underlying this rule of construction ceases to exist and the Legislature may properly be held to have intended that the statute apply to governmental bodies even though it used general statutory language only.” (Regents of University of Cal. v. Superior Court of Alameda County (1976) 17 Cal.3d 533, 536 (Regents).

Although the “sovereign powers” principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent. (Wells, supra, 39 Cal.4th at p. 1193.)

The Court of Appeal applied a three-part test. First, look for “express words” referring to governmental agencies. If there are none,look for “positive indicia” of a legislative intent to exempt such agencies from the statute. If no such indicia appear, ask whether applying the statute would result in an infringement upon sovereign governmental powers.

Here 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 address matters of employee allowances and expense reimbursement. “[T]here can be no doubt that public education is among the state’s most basic sovereign powers.” (Wells, supra, 39 Cal.4th at p. 1195.)

Thus, the Court of Appeal concluded that the “expenses Krug alleges – for computers, monitors, chairs, printers, electricity, internet, and other alleged business expenses – fall directly within CSU’s authority to set rules for employee equipment allowances and the purchase of materials, supplies, and equipment.”