No Business Expense Reimbursements for Government Employees

The recent holding in Krug v. Board of Trustees gives government employers yet another break from complying with the requirements of long-established Labor Codes. This time, the California Court of Appeals for the Second District held that government employers are not required to reimburse employees for business expenses under Labor Code section 2802.

The California Supreme Court tasked the Krug court to consider whether a California State University, Los Angeles professor was entitled to be reimbursed for the costs of purchasing computer equipment necessary for him to comply with the Board of Trustees of the California State University’s requirement that its employees conduct college classes remotely during the Covid-19 pandemic, pursuant to the Supreme Court’s recent holding in Stone v. Alameda Health System (2024) 16 Cal.5th 1040 . Krug, the plaintiff professor, argued that, under Labor Code section 2802, he was entitled to reimbursement of the costs of purchasing his home computer and other equipment because they were necessary work expenses incurred to perform his job according to his employer. The Board of Trustees argued that it did not have to reimburse Krug because, as a government employer, it was not subject to the requirements of Section 2802. The court agreed with the Board of Trustees and held that it was not subject to the requirements of Section 2802 because the statutory framework of the section demonstrates that the legislature did not intend to include government/public entities in its obligations.

The Krug court’s ruling was based on the analytical framework set forth by the Supreme Court in Stone, which evaluated whether a public hospital was considered an “employer” under the applicable statutes and, therefore, was required to provide its healthcare workers meal and rest breaks. In Stone, the court “examined the language, structure, and history of the statutes and wage order at issue to determine whether the Legislature intended to impose their requirements on public employers.” The Krug court performed its own evaluation of the language, structure and history of Section 2802 in evaluating whether the term “employer” in that section encompasses both government and private companies.

The court acknowledged that the language of Section 2802 is ambiguous and could result in two reasonable interpretations of the term employer: one that includes government employers based on the fact that the statute does not explicitly exclude them, and one in which government employers are not included because they are not explicitly enumerated. In light of this, the court examined the statutory language “in the context of the entire statutory framework to discern its scope and purpose.” The court noted that Section 2802’s silence about government employers is in stark contrast to the neighboring sections in Article 2 that all either include or exclude them. (See, e.g., Labor Code §§ 2806–2809)

Notably, each of these sections was amended and/or added after Section 2802 was enacted, showing the absence of the legislature’s intent to tacitly include government employers in the provision. In addition, Section 2802.1 specifically entitles certain public hospital employees to reimbursement in limited contexts, demonstrating that government employees are not entitled to reimbursement under the general rules of the statute. Moreover, the court pointed to other Labor Code provisions that also expressly state they apply to government as well as private employers. (See, e.g., Labor Code §§ 555, 233 and 1182.12.)

The court also cited the history of the same 1937 legislative session that enacted worker’s compensation rules, with explicit inclusion of both public and private employers — drawing the conclusion that, if the legislature wanted to include a reference to government employers in Section 2802, they would have.

The court further strengthened its conclusion by evaluating the legislative history of the original statute from which Section 2802 was derived, declaring that “the only positive indication about the meaning of employer, which can be inferred from the Commission’s comments on 1872 Civil Code [S]ection 1969[,] is that the term referred only to private entities.” Later legislative history leads to a similar conclusion. Finally, the court acknowledged that other courts have applied Section 2802 to government employers and it is well-decided that most wage-and-hour requirements only apply to private employers.

The Krug court used strong language and analysis in holding that government employers are not required to reimburse employees for business expenses under Labor Code section 2802. There seems little wiggle room in arguing that another public employer is subject to the requirements of this section. It also provides the structure for a future analysis of other Labor Code provisions to determine whether their obligations apply to government employers. For more information or specific guidance, please contact Jennifer Morin.