So you are saying that the ambient temperature is 25C and the LM35 is outputting 0.28V? If so, it is possible that the LM35 really is at 28C if it is mounted on a PCB / breadboard that has components generating heat. Also, are you measuring the voltage right at the LM35s pins Vout & Gnd? If not, it is possible that there is a voltage drop in the leads due to current draw from other devices.