Employer Who Sues Ex-Employee Does Not Have to "Indemnify" Ex-Employee for His Attorney Fees

Nicholas Laboratories, LLC sued its former employee, Chen.  Ultimately, the parties resolved the case. Chen sought reimbursement of his fees under Labor Code Section 2802.

Section 2802, subdivision (a), states: "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, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful."
Chen's claim was that the fees he incurred defending himsel was a business expense that arose because of my work for my former employer.

No sale.

Thus, we conclude the attorney fees incurred by Chen do not fall within the domain of section 2802. We are not persuaded that the Legislature, in drafting section 2802, intended to depart from the usual meaning of the word "indemnify" to address "first party" disputes between employers and employees. The Legislature could have specifically provided in section 2802 that attorney fees incurred defending an action by the employer were recoverable by a prevailing employee. The fact that the Legislature did not do so suggests disputes between employers and employees are subject to the ordinary rules applying to the recovery of attorney fees in California litigation.

The court also decided Corporations Code Section 317, containing another indeminification provision, does not apply to LLCs.

The case is Nichols Laboratories, LLC v. Chen and the opinion is here.

DGV