On March 20, 2017, the Minnesota Court of Appeals, in a published opinion, ruled that an employer required to indemnify its employees under Minn. Stat. § 181.790 cannot sue an employee for on the job negligence to recover payment(s) made to a third party. First Class Valet Services, LLC v. Gleason, __ N.W.2d ___ (A16-1242).

While parking cars as a valet for the employer, the employee negligently caused significant damage to two vehicles on two different occasions. The employer paid the owners of the vehicles for the damages and then sued the employee to recover the payments made to the vehicle owners. The district court dismissed the case and the Court of Appeals affirmed the dismissal.

Minn. Stat. § 181.970 provides, in part:

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.

While the law does provide for some limited exceptions, those were not applicable in the case, nor would they be applicable in most private employer-employee situations. The Court wholly rejected the employer’s arguments stating:
“In practical effect, allowing First Class to recoup amounts it paid to meet its duty to indemnify Gleason under section 181.970 would allow First Class to avoid its duty to indemnify altogether and render the statute ineffective.”

Employers should make certain that their business insurance is up to date and covers the kinds of risks/damages that employees can create if negligent in the performance of their jobs.

Our firm routinely provides advice and counsel on the employer-employee relationship. If you have employment relationship questions, don’t hesitate to contact us.