What employers should know about reimbursing remote working expenses

A recent case arose when a university refused to reimburse home-office expenses under section 2802(a) of California’s Labor Code, which required an employer to indemnify employees for necessary expenditures incurred as a direct consequence of discharging their job duties.

In March 2020 amid the COVID-19 pandemic, the California State University (CSU) ordered its teachers to start remotely teaching classes. The plaintiff, a biology professor at CSU-Los Angeles, could not access his workplace office to retrieve the computer and printer provided by the university.

The plaintiff paid the expenses for replacing these items then asked the university for reimbursement. He claimed that section 2802 required the university to reimburse employees for necessary work-related expenses.

The university refused to reimburse these expenses. It argued that section 2802(a) was inapplicable to it because applying this provision would infringe on its sovereign powers as a state department. The Department of Industrial Relations disagreed with the university’s interpretation of this provision.

The plaintiff filed a class action complaint against the university’s board of trustees on behalf of himself and similarly situated faculty employees. He made claims under section 2802(a) and under the Private Attorneys General Act of 2004 (PAGA).

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The plaintiff allegedly incurred necessary business expenses for electricity, postage, internet service charges, use of personal phones for work-related purposes, office supplies, chairs, computers, printers, ink, toner, and computer monitors that he needed to perform his work.

In response, the university argued that, because it was a state department, it enjoyed a broad exemption from Labor Code provisions infringing on its sovereign powers.

The trial court ruled in favor of the university. A governmental agency was generally exempt from Labor Code provisions that did not expressly apply to public employers like the university, the trial court found.

Appeal court sides with public employer

The plaintiff appealed. In the case of Krug v. Board of Trustees of the California State University, the California Court of Appeal for the Second District affirmed the judgment of the trial court.

Section 2802 did not answer the question of whether the term “employer” included public employers, the appellate court noted. The provision lacked express words referring to governmental agencies or positive signs of a legislative intent to exempt these agencies, the appellate court added.

In this case, the appellate court decided that section 2802 did not apply to the university. According to the appellate court, applying this provision to the university would do the following:

• would infringe on its sovereign governmental powers
• would affect the functions and responsibilities that the legislature gave to the university
• would limit the authority vested in the university to establish policies and to set the terms for the reimbursement of its employees for necessary expenses
• would potentially divert limited educational funds from the university’s core function toward the payment of legal judgments and possibly huge additional amounts to outside parties

Lastly, the appellate court also rejected the plaintiff’s PAGA claim. The plaintiff was not an aggrieved employee as the PAGA required because the university did not violate section 2802, the appellate court explained.