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This Wisdom of the Crowd, compiled from responses posted on the New to In-house eGroup* addresses employee indemnification.
*(Permission was received from ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd Resource)
I was currently approached by an affiliate with a request to update a standard employment agreement template for an insurance agent. One item that they have requested is that I include a provision stating that the Employee agrees to indemnify and hold the Employer harmless from any and all claims resulting from the acts conduct or omissions on the part of the Employee in the course of his/her duties under the contract. I have not typically included such indemnification language in my employment agreements, and I am wondering if there are any issues in doing so. 
Does anyone see any issues with this concept? Does anyone utilize a similar arrangement with your employees?


Wisdom of the Crowd

Response #1: I admit that my first impression, without knowing the background of why the affiliate company is seeking to be indemnified to a huge overreach by the employer, and even punitive. Employees routinely make mistakes, and many cost the employer money. That's typically seen as the cost of doing business. Perhaps you could suggest that the employer limit the indemnity to gross or willful negligence with the reasoning that: 1) not industry-wide trend; 2) that type of employee to employer indemnity could be challenged in courts as coercive on part of employer if your client ever sought to enforce; 3) your client employer is going to be at a competitive disadvantage when looking to hire the best and brightest who will, for some pretty obvious reasons, recoil from joining an employer who seeks to shift the burden of mistakes to their employees. I would think the thing your client is seeking to deal with is the very reason for the existence of Errors & Omissions policies.1

Response #2: In California that would not hold up. In fact, the labor code requires employers to indemnify employees. Interesting that it says "while acting within the course and scope." There may be a tiny opening in some states that should say if you were acting outside your scope then the company is not liable and not responsible for your action.2

Response #3: I think an indemnity in an employment context is really inappropriate. I hate indemnities for general matters in commercial agreements between companies of equal power. I triply hate them when the parties are fundamentally unequal. You don't need an indemnity for a common breach of contract. You only need one when you otherwise have no remedy, such as when a third party sues you and it's really the other company's fault.
For an employee, aren't there policies about what the agent may and may not do? Isn't the company providing training on how to do them right? What about supervision? What exactly could the agent do to cause a problem? And, if it's potentially serious and not covered by a policy, why not have a contract that says "agent agrees not to do this" and then take action against him if he does it? I think violation of the agreement would be ground for termination, which ought to carry significant weight. When I think about bad things that our employees can do, it's mostly about misuse of intellectual property, and we have a contract with everyone of them. I wouldn't ask them to indemnify, I would sue them if I really had to.
I wouldn't sign an employment contract with an indemnity in it.3
Response #4: I include indemnification provisions for independent contractors, but never employees. In California, an employer is responsible for employee actions taken in the normal course of business. Such a provision would be contrary to the law. In addition, what kind of person would agree to that? Surely no one with the brains or assets to make it worth the paper it is written on.4
Response #5: I see this is for an insurance agent- is it an actual employment relationship or an agent appointment agreement? Agents typically have Errors & Omissions insurance coverage and such a clause could be an attempt to shift that risk to their Errors & Omissions policy.5
1Response from: Andrea Castro, VP Compliance Counsel, Trident Land Transfer Company LP (6/30/2016)
2Response from: Tara Morgan, Corporate Counsel, Stars Behavioral Health (7/1/2016)
3Response from: Deborah Schwarzer, General Counsel, Aesris Communications, Inc. (6/30/2016)
4Response from: Maria Mascaro, Legal Counsel, ModCloth, Inc. (6/30/2016)
5Response from: Larry Lambert, Associate General Counsel, Missouri Employers Mutual Insurance (6/30/2016)
Region: United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.

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