Are Employees Liable to Their Employers for Negligence?
In general, an employee cannot be liable to an employer for the employee’s negligence.
Can a Minnesota Employer Sue an Employee for Damages Caused by Negligence?
Generally, no. Employers generally cannot sue an employee in Minnesota for damages caused by the employee’s negligence, errors, or omissions.
Are there any exceptions to suing employees for negligence?
Yes. Exceptions exist for a few areas. Employees may be liable to their employers for the following actions:
- intentional misconduct,
- willful neglect of the duties of the employee’s position,
- bad faith,
- acts out outside the employee’s scope of employment, and
- employees subject to an employment contract.
Where is the Law Providing that Employees are Not Liable to Employers for Negligence?
This law is found in Minnesota Statute section 181.970, which must be understood by the way the court interpreted the word “indemnify” in the case of First Class Valet Servs., LLC v. Gleason, 892 N.W.2d 848 (Minn. App. Mar. 20, 2017).
1. Employers Must Indemnify Employees
The Minnesota state law that generally covers employee liability for negligence on the job is Minnesota Statute section 181.970:
Subdivision 1. Indemnification required.
An employer shall defend and indemnify its employee for civil damages, penalties, or fines claimed or levied against the employee, provided that the employee:
(1) was acting in the performance of the duties of the employee’s position;
(2) was not guilty of intentional misconduct, willful neglect of the duties of the employee’s position, or bad faith; and
(3) has not been indemnified by another person for the same damages, penalties, or fines.
Subdivision 2. Exceptions.
Subdivision 1 does not apply to:
(1) employees of the state or a municipality governed by section 3.736 or 466.07;
(2) employees who are subject to a contract or other agreement governing indemnification rights;
(3) employees and employers who are governed by indemnification provisions under section 302A.521 (Minnesota Business Corporation Act), 317A.521 (Minnesota Nonprofit Corporation Act), 322B.699 (Minnesota Limited Liability Company Act), or 322C.0408 (Minnesota Revised Uniform Limited Liability Company Act), or similar laws of this state or another state specifically governing indemnification of employees of business or nonprofit corporations, limited liability companies, or other legal entities; or
(4) indemnification rights for a particular liability specifically governed by other law.
Minn. Stat. § 181.970 (parentheticals added). This statute is similar to the common law doctrine that an employer (principal) is liable for the acts of its employee (agent) if the employee is acting in the scope of employment.
2. “Indemnify” includes “Hold Harmless”
In First Class Valet Servs., LLC v. Gleason, 892 N.W.2d 848 (Minn. App. Mar. 20, 2017), the Minnesota Court of Appeals considered whether “indemnify” includes “hold harmless.” In short, the court held that this statute prevents employers from seeking reimbursement from employees because “[t]he term ‘indemnify’ means to ‘hold harmless.'” For this definition, the court cited Black’s Law Dictionary. This was a controversial holding because the court used a definition in a law dictionary to effectively void the common law codified by this statute. Under common law, an employer had a duty to defend the employee under the doctrine of respondeat superior (translated to mean “the superior is responsible” for acts of its agent), Afterwards, the employer could pursue reimbursement from the employee. In First Class Valet, the court acknowledged this, citing Schneider v. Buckman, 433 N.W.2d 98, 102 (Minn. 1988) (“it is . . . well settled that an employer is entitled to recover from the employee damages which the employer was compelled to pay because of the employee’s negligence.”)b The court noted that “[C]ourts presume that statutes are consistent with the common law, and ‘if a statute abrogates the common law, the abrogation must be by express wording or necessary implication'” (citing Brekke v. THM Biomedical, Inc., 683 N.W.2d 771, 776 (Minn. 2004)).
However, in First Class Valet, the court held that the Minnesota Legislature intended to prevent employers from being reimbursed by employees for the employee’s negligence because the Legislature used the word “indemnify.” By choosing the term of art “indemnify,” we assume the legislature intends to use the accepted definition of that term of art. The term “indemnify” means to “hold harmless.” “Hold harmless,” in turn, means to “absolve (another party) from any responsibility for damage or other liability arising from the transaction.” (citations and quotations omitted) The court opined that to hold otherwise would create an “endless cycle of circular obligations” because the employer would need to indemnify the employee in a suit by the employer against the employee. However, I believe there is equal merit to an argument that this statute was intended to cover lawsuits by third-parties against the employee, and liability between the employer and employee should be settled as the common law established: the court decides whether the employee should reimburse the employer for damages caused by the employee’s negligence. The legal community does not universally agree that “indemnify” is synonymous with “hold harmless.” For example, see these blog articles by Ross Guberman and Ken Adams. However, for now, Minnesota law treats “indemnify” the same as “hold harmless,” at least for this particular statute.