An employee in Minnesota, acting in good faith and within the scope of the employee’s work, is normally protected from direct civil liability by his or her employer through what is typically referred to as indemnification. Minnesota lays out this protection in statute at section 181.970 – Employee Indemnification. It typically covers all damages, penalties, and fines. You can find the statute here: https://www.revisor.mn.gov/statutes/?id=181.970.
At its heart this law states that an employer, not the employee, is responsible for damages resulting from the conduct of the employee on the job. There are exceptions, of course. The statute contains carve-outs for state and municipal employees, employees subject to contracts governing indemnification, and indemnification addressed through other laws. The statute also does not protect intentional misconduct, willful neglect of duties, or situations where an employee is already indemnified in some other way for the same damages.
In September 2015, First Class Valet Services, LLC brought a negligence action against former employee Raleigh Gleason to recover the amounts First Class paid to reimburse two car owners whose vehicles Gleason damaged through negligent conduct while on the job. In response, Gleason moved to dismiss the claims for failure to state a claim upon which relief may be granted, asserting that he was protected from such claims through Minn. Stat. § 181.970. The district court agreed, granted Gleason’s motion, and dismissed First Class’ claims. First Class appealed.
First Class asserted that after indemnifying its employee against the third party, it should be allowed to recover damages incurred by the employer due to the employee’s conduct. Prior to the enactment of Section 181.970, Minnesota courts allowed such claims based on common law. First Class further argued that an abrogation of common law by statute must be clear.
The Minnesota Court of Appeals, in a published decision available here: http://mn.gov/law-library-stat/archive/ctappub/2017/OPa161242-032017.pdf, affirmed the lower court decision, stating that the language in Section 181.970 did clearly express an intent to abrogate such common-law claims. The Court held the legislature, by using the term “indemnify,” which has the specific legal meaning “to hold harmless,” intended just that, the employee should be beyond liability for whatever harm they caused.
The Court additionally noted that, if they accepted First Class’ argument, the language in Section 181.970 would produce an unreasonable outcome. By the provision’s language requiring an employer to “defend and indemnify its employee for civil damages” without regard to the source of such damages, an employer would have to indemnify the employee from the same damages the employer seeks to recover from that very employee. The Court reasoned the legislature could not have intended such an endless cycle of litigation.
The takeaway message is that, barring a decision to the contrary in the near future by the Minnesota Supreme Court, employers are on the hook for the vast majority of employee conduct. If you are facing the prospect of liability for negligent conduct by an employee, or if you are an employee whose employer is attempting to have you cover the cost of expenses related to the performance of your work, you should consult with an attorney to determine your rights and any risk.
