California Labor Code Section 2802

Current as of January 9, 2023

§ 2802. Indemnification of employee for expenditures or losses in discharge of duties or obedience to directions; Citation for violation of reimbursement obligations

(a) 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.

(b) All awards made by a court or by the Division of Labor Standards Enforcement for reimbursement of necessary expenditures under this section shall carry interest at the same rate as judgments in civil actions. Interest shall accrue from the date on which the employee incurred the necessary expenditure or loss.

(c) For purposes of this section, the term “necessary expenditures or losses” shall include all reasonable costs, including, but not limited to, attorney’s fees incurred by the employee enforcing the rights granted by this section.

(d) In addition to recovery of penalties under this section in a court action or proceedings pursuant to Section 98, the commissioner may issue a citation against an employer or other person acting on behalf of the employer who violates reimbursement obligations for an amount determined to be due to an employee under this section. The procedures for issuing, contesting, and enforcing judgments for citations or civil penalties issued by the commissioner shall be the same as those set forth in Section 1197.1. Amounts recovered pursuant to this section shall be paid to the affected employee.

Interpretation Necessary Expenditures

Factors having an obvious bearing on whether legal expenses incurred by an employee were necessary, within the meaning of Lab C § 2802 (employer must indemnify employee for expenses or losses necessarily incurred in direct consequence of discharge of employee’s duties), include: whether the employer has already agreed to provide counsel; the competency and experience of counsel provided by the employer; any time constraints requiring the employee to take unilateral action in selecting and hiring counsel; the complexity and difficulty of the litigation against the employee in relation to the ability and capacity of the employer-provided counsel; whether there are any conflicts between the employer and employee; the past history of the relationship between the employer and employee; and the nature of any problems arising in the attorney-client relationship and the reasons behind those problems. Evidence relating to these factors is obviously relevant in determining whether any given expenditure is a necessary one. Grissom v. Vons Companies, Inc. (Cal. App. 4th Dist. 1991), 1 Cal. App. 4th 52.

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