Since 1975, California courts have held that an employer that refuses to defend an employee sued over work can still end up paying the employee’s lawyer. Labor Code section 2802(a) says 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.” That covers judgments and defense costs in lawsuits over job conduct, and the company’s answer to a tender usually decides what it pays.
When does an employer have to cover an employee’s lawsuit?
When a third party sues the employee for conduct within the course and scope of the job. In Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, the Court of Appeal explained that “Section 2802 thus requires an employer to indemnify an employee who is sued by third persons for conduct in the course and scope of his or her employment, including paying any judgment entered and attorney’s fees and costs incurred in defending the action.”
The employee has to show the costs were necessary and came from doing the job. On the job-connection element, the court said it “is met if ‘the conduct defended against was within the course and scope of employment.’” The typical cases are a manager sued by a customer for defamation, a supervisor named personally in a coworker’s harassment suit, and a driver sued after a crash on a work errand.
Winning the underlying case isn’t required. According to Cassady, “As long as the employee is acting within the scope of his or her employment, the right to indemnity is not dependent upon a finding that the underlying action was unfounded.”
Does section 2802 require the employer to defend the employee?
No, but refusing has a price. In Carter v. Entercom Sacramento, LLC (2013) 219 Cal.App.4th 337, the Court of Appeal quoted an earlier decision holding that “Section 2802 does not say that an employer must ‘defend’ an employee. The word ‘defend’ does not appear in section 2802.”
The catch is that indemnity covers defense costs after the fact. In Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096, the court put it this way: “if the employer elects to run a risk and refuses to defend, the employer must indemnify the employee for his attorney fees and costs in defending the underlying action if the employee was sued for acts within the scope of his employment.”
A refused tender is a bet that the conduct fell outside the job. If the bet loses, the employee has picked the lawyer and set the pace of the case, and the company pays the reasonable bill without having had any say in how it was run. For most employers, accepting the tender and controlling the defense is the cheaper course.
Which conduct falls within the course and scope of employment?
Courts borrow the respondeat superior test. The Jacobus court described it as covering conduct that is “not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer’s business.” It added that an employee’s conduct may fall within the scope of employment “even though the act does not benefit the employer, even though the act is willful or malicious, and even though the act may violate the employer’s direct orders or policies.”
There’s a well-known limit. The court noted that “The cases have consistently held that under the doctrine of respondeat superior, sexual misconduct falls outside the course and scope of employment.”
Jacobus shows why that limit doesn’t settle every harassment case. A secretary sued the company’s chief financial officer and the company for sexual harassment. The company refused to defend him and settled, and a jury found he hadn’t harassed her. He sought $82,083 in defense costs. The court held the consensual exchanges were “broadly incidental to their employment” and that “If the employer chooses not to defend the accused employee in the lawsuit, then the employer must pay the defense costs of the exonerated employee.”
That’s the scenario employers misjudge most often. The company may be lined up against the accused employee in the same case, and still owe the employee’s fees if the jury clears him.
Can the employer choose the employee’s lawyer?
Usually, if the lawyer is competent and has no conflict. In Carter, a woman died after a radio station’s water-drinking contest, and her family sued the station and several employees, including an assistant who had handed out the water. The station’s insurer accepted his tender without a reservation of rights and appointed defense counsel. He kept his own lawyer and later sought $807,421.22 in fees and costs.
The trial court awarded $1,980, covering only the period before the insurer appointed counsel. The Court of Appeal affirmed, stating “we reject Carter’s argument that he was absolutely entitled to be represented by counsel of his own choice at the expense of Entercom or Vigilant,” according to the opinion. Fees after a proper offer of counsel weren’t “necessary” under the statute.
Delay undoes that protection. Carter quoted the warning that “If an employer dithers on an employee’s request for counsel while time to respond to a complaint or some discovery request is running out, the employee is practically forced to go out and hire an attorney to take the appropriate action,” according to the opinion. Conflicts do too. When the company plans to argue the employee acted outside the job, the same firm can’t defend both of them.
| Situation | Likely result under section 2802 | Authority |
|---|---|---|
| Employee sued over job conduct, company refuses tender, employee wins | Company pays reasonable defense costs | Jacobus |
| Employee sued over job conduct, judgment entered | Company pays the judgment and defense costs | Cassady |
| Company promptly provides competent, conflict-free counsel and the employee hires a different lawyer | Later fees generally aren’t necessary expenditures | Carter |
| Lawsuit covers work done for several employers | Each employer covers costs tied to work done for it | Cassady |
| Claim rests on personal sexual misconduct | Generally outside course and scope | Jacobus |
| Severance release of “any and all” claims | Doesn’t waive section 2802 rights | Edwards; Lab. Code 2804 |
Can an employee waive indemnification in an agreement or release?
No. Labor Code section 2804 provides that “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void.”
The Supreme Court of California applied that rule in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, stating that “indemnity rights are nonwaivable, and any contract that does purport to waive an employee’s indemnity right would be contrary to the law and therefore unlawful to that extent.” The court held that a release of “any and all” claims “does not encompass nonwaivable statutory protections, such as the employee indemnity protection of Labor Code section 2802.”
For employers, a signed severance release won’t stop a former employee from tendering a lawsuit filed after the separation. Release language that tries to waive indemnity expressly invites a fight it can’t win.
What to do when an employee tenders a lawsuit to the company
The first few weeks after a tender set most of the cost. More on how these disputes are handled is on the firm’s California employment defense page.
- Put a litigation hold on the complaint and tender letter, the employee’s job description and personnel file, and the emails and texts about the conduct the lawsuit describes.
- Calendar the employee’s response deadline in the third-party case, and notify the company’s EPLI and other liability carriers, which may owe the employee a defense directly.
- Identify the people who know what the employee was doing and why, and avoid any job action against the employee that could look like a response to the tender.
- Compare the allegations to the employee’s actual duties to decide whether the conduct was within the course and scope of employment, and check for any conflict between the company’s position and the employee’s.
- Get legal advice before refusing the tender, accepting it with conditions, or appointing counsel, because each choice affects what the company owes later.
Employee indemnification questions
Does section 2802 cover former employees?
Yes. The duty attaches to conduct during the employment, not to the employee’s status when the lawsuit arrives. In Cassady, the lawyer was sued years after leaving the firm, and in Carter, the employee had been fired before the lawsuit was filed. A company that receives a tender from a former employee should treat it with the same urgency as one from a current employee.
Can the employee recover fees for suing the company under section 2802?
Yes. Section 2802(c) defines necessary expenditures to include “attorney’s fees incurred by the employee enforcing the rights granted by this section.” Under subdivision (b), awards carry interest “at the same rate as judgments in civil actions.” A refused tender can turn into two fee bills: the defense of the original case and the cost of the indemnity lawsuit.
What if the employee worked for more than one company during the events?
Each employer answers only for work done for it. In Cassady, the court held the employee “bears the burden to prove which expenses he incurred as a result of performance of his duties with Morgan Lewis as opposed to other employers.” Fees for work common to claims from several periods can still be recovered in full.
Does the company have to pay if the employee loses the lawsuit?
It can. Indemnity under section 2802 covers losses as well as defense costs, and Cassady describes the duty as including “paying any judgment entered.” The question is whether the conduct was within the job, not who won. That’s why the scope analysis should happen at the tender, before a verdict fixes the amount.
If an employee asks your company to cover a lawsuit
If an employee has tendered a lawsuit to your company, or has sued for defense costs under section 2802, the employee’s actual duties and the company’s response to the tender usually decide what the company owes. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving employee indemnification demands under Labor Code section 2802. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code section 2802 and section 2804. The decisions are Jacobus v. Krambo Corp. (2000) 78 Cal.App.4th 1096, Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, and Carter v. Entercom Sacramento, LLC (2013) 219 Cal.App.4th 337.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.