The duty of indemnification
The law in New Zealand places a duty on an employer to indemnify their employees for costs/ liabilities which arise during the reasonable performance of their duties. These liabilities can be for such things as the legal costs of defending Court proceedings or fines imposed as a result of certain conduct. This duty applies even when there is no specific term in the employment agreement (though some employment agreements may contain clauses which codify or extend the duty).
Recent case – Katz v Mana Coach Services
The Court of Appeal has confirmed the above principles by holding that an employee’s liability (in that case for legal costs) was incurred because of conduct outside of the reasonable performance of their work.
How the duty may apply to you
If your business involves employees operating in an area where they might themselves incur costs or other liabilities then you may find yourself asked to indemnify those employees for those costs.
How we can help
The duty to indemnify employees exists without a specific contractual provision. However, it is easier to work out when it applies where an employee’s role and standards of care are clearly defined in their employment agreement.
The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.
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Glenn Finnigan, PARTNER
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