Employee’s Indemnity Request Under Labor Code Section 2802 Only Garnered Employee $1,908 In Fees/Costs Out Of Requested $807,421.22 In Defense Fees/Costs.
Labor Code section 2802 provides that an employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties (even unlawful actions unless the employee believed them to be unlawful). Although not imposing a duty to defend, case law under section 2802 recognizes that an offer to defend the employee obviously impacts the employee’s right to indemnity under this statute.
The key issue in Carter v. Entercom Sacramento, LLC, Case No. C066751 (3d Dist. Sept. 3, 2013) (published) was whether employee’s insistence on using his own attorneys rather than accepting use of attorneys proffered by employer’s insurance carrier was a proper “necessary expenditure” under section 2802.
Here are the facts. Plaintiff seeking indemnification from former employer was an ex-part-time employee of defendant working as an assistant to a morning radio program. One morning, the radio program conducted a contest at the station for listeners involving an award for the contestant who could delay urinating the longest after drinking a large quantity of water. One of the contest participants died from vying in the contest. Plaintiff and others were fired by defendant. Deceased’s family filed suit against numerous defendants, including plaintiff ex-employee. Plaintiff tendered defense to employer’s carrier, who appointed defense counsel for him. However, plaintiff wanted a different attorney of his choice to be paid for by the carrier, filing a cross-complaint for section 2802 indemnity against employer. Employer’s carrier settled plaintiff’s suit for $25,000 each with respect to one plaintiff group as to eight individual defendants, including plaintiff, and for $2,500 each with respect to another plaintiff group. Later, a jury awarded one plaintiff group more than $16 million in damages against employer. Then, ex-employee seeking indemnification, through his independently chosen attorneys, submitted a bill seeking to recoup $807,421.22 in fees/costs (yes, that’s the number) from employer. The lower court found ex-employee’s failure to accept carrier counsel was unreasonable and that his requested fees/costs through his chosen counsel were not necessary expenditures, awarding only $1,980 in fees/costs as against employer under section 2802.
Judgment affirmed.
In this area, necessity is a question of fact, with a court looking at these factors: (1) whether the employer already agreed to provide counsel; (2) the competency and experience of the employer’s chosen counsel; (3) any time constraints impacting employee; (4) the complexity and difficulty of the litigation against employee in relation to the ability of employer-provided counsel; (5) any conflicts between employer and employee; (6) past history between the employer and employee; and (7) the nature of any problems arising in the attorney-client relationship and reasons behind them. (Grissom v. Vons Companies, Inc., 1 Cal.App.4th 52, 58, 58 n. 4 (1991).) In this case, ex-employee could not show why carrier-appointed counsel would not adequately protect his interests, especially given that he was settled out for relatively small dollars. His insistence on his own attorneys, who ran up a sizeable bill, was not necessary, with substantial evidence supporting the lower court’s factual call that this was so.