In Wisconsin, municipalities, including school districts have a legal obligation to ensure that their employees and officials are protected from personal financial loss while acting within the scope of their official duties. This protection, called indemnification, extends to both damages and legal defense costs. This legal update will review the scope of the indemnification obligations, including relevant statutes, case law, and exceptions.
Pertinent Wisconsin Statutes
The primary statute governing the indemnification of municipal employees is Wis. Stat. § 895.46, which requires public employers to cover any damages and/or costs arising from a civil action brought against employees or public officers when they are sued in their official capacity or as an individual for acts committed within the scope of their employment.
The statute makes no distinction between negligent and intentional actions when determining whether an employee or public officer acted within the scope of their employment for purposes of indemnification. Therefore, municipal employees and public officers are generally covered regardless of the willfulness of the conduct at issue. Actions made within the scope of employment include decisions made during their employment, regardless of whether the employer desired the outcomes of these decisions or not.
However, indemnification is not guaranteed to the employee or public officer in all situations. Indemnification under Wis. Stat. § 895.46 does not apply if the employee or public officer was acting outside the scope of their employment. The attorney’s fees and costs also are not recoverable if the employee fails to give the employer notice of the action against them as soon as reasonably possible. Similarly, attorney fees and costs are not recoverable if the employer offers legal counsel, and the employee or public officer refuses the offer or refuses to cooperate in the defense of the litigation.
In addition to Wis. Stat. § 895.46, Wis. Stat. § 895.35 authorizes the reimbursement of reasonable expenses incurred by municipal officers defending charges or other actions seeking personal liability for the performance of their official duties. Under Wis. Stat. § 895.35, reimbursement is discretionary and only applies if the actions are dismissed, discontinued, or determined in favor of the officer. Thus, a municipality may choose not to reimburse the officer even if he or she prevails in the underlying case.
Additionally, reimbursement is only available to public officers. Many employees, including school teachers, are not public officers and are not entitled to reimbursement under Wis. Stat. § 895.35. The statute also contains specific provisions relating to criminal proceedings against protective service officers, such as police officers, emergency medical responders, fire fighters, and correctional officers.
What is “Scope of Employment” Under Wis. Stat. § 895.46?
The phrase “scope of employment” is critical in determining whether an employee’s action qualifies for indemnification under Wis. Stat. § 895.46. Generally, ‘scope of employment’ refers to actions that are part of the employee’s official duties and responsibilities. If an employee is acting, in part, to serve their employer, even if they step outside of the precise instructions given by their employer, the actions may fall within the definition of ‘scope of employment’. In Olson v. Connery, 156 Wis. 2d 488 (1990), the Wisconsin Supreme Court emphasized that if the employee’s actions were “actuated by a purpose to serve the employer,” a jury could find that the employee acted within the scope of employment. The court further held that the purpose need not be the main or sole purpose for acting. Courts typically look at the employee’s intent to further the interests of their employer as just one factor in determining if the actions fall within the ‘scope of employment’ requirement.
Only in situations where the employee’s actions are not intended to serve the employer, but rather, are actions to further an independent purpose, demonstrated by the time and space limits of their employment, will a court reasonably conclude the employee was acting outside the scope of his or her employment. In Cameron v. City of Milwaukee, the Wisconsin Supreme Court held that an employee’s actions are considered within the scope of employment if the actions, even if improper, are “closely connected with what the servant was hired to do.” 102 Wis. 2d 448, 457, (1981). Thus, the phrase “scope of employment” has been interpreted broadly.
Intentional Torts and Indemnification
Some cases have explored whether municipalities must indemnify employees for intentional torts, such as assault or battery. In Graham v. Sauk Prairie Police Commission, 915 F.2d 1085 (1990), the 7th Circuit Court of Appeals ruled that indemnification applies even if an employee committed an intentional tort, so long as the intentional tort was committed within the scope of employment. The court reasoned that indemnification is required under Wis. Stat. § 895.46, unless the employee’s actions were entirely outside the scope of their employment, regardless of whether the conduct was negligent or intentional. The court determined that the legislature did not intend for an intentional tort exception to be read into the indemnity statute. Therefore, even if an employee abuses their authority while working for the employer, it may not be sufficient for a court to conclude that the employee’s actions did not fall within the scope of their employment.
The Bell v. City of Milwaukee decision, another case decided by the 7th Circuit, further clarified that Wisconsin municipalities must indemnify their employees for all damages, including punitive damages, in cases involving intentional torts. 746 F.2d 1205,1271 (1984). This is significant because while punitive damages are usually intended to punish the defendant, Wis. Stat. § 895.46 obligates municipalities, rather than an individual employee, to bear the cost of such judgments.
Providing Legal Representation
As mentioned above, Wis. Stat. § 895.46 requires municipal employers to either provide legal counsel to the employee or pay for legal counsel. Based on this language, municipal employers are faced with two options at the outset. One option is for the municipal employer to pay for the employee’s legal representation directly and from the start. This option gives the employer greater control over the selection of legal representation, often through their insurance company.
Under this option, the employer or insurance company would pay the legal counsel regardless of whether the employee is found to have acted within the scope of employment during the pendency of the case. However, once an employer chooses to provide legal counsel, they must provide representation for the entirety of the case.
Alternatively, the employer could choose not to provide legal representation to the employee. However, the employer will have little or no control over the selection of legal representation under this option. This option may also result in additional litigation expenses between the employer and the employee or public officer to determine whether the employee or public officer was acting within the scope of their employment. Typically, an employer will only choose this option if they strongly believe the employee or public officer was not acting within the scope of their employment.
Employers can face a difficult choice when they become aware of a pending action against an employee or public officer. They must evaluate the likelihood that a court or other fact-finder will conclude the individual was acting within the scope of their employment. Further, they should weigh the benefits of selecting legal counsel against the likelihood that a court may find they are not required to pay for the employee’s or public officer’s legal representation.
Conclusion
In Wisconsin, municipalities (including public school districts) are required to indemnify their employees and officers for damages, legal costs, and judgments resulting from actions taken within the scope of their employment. This indemnification applies to most actions performed by public employees, including intentional torts, if the actions were in some measure meant to serve the employer. Scope of employment is broadly defined, with courts generally ruling that even actions that appear intentionally made in bad faith or outside the exact instructions of the employer may still be indemnifiable if they are connected to the employee’s duties.
The laws are designed to protect public employees from personal financial ruin while ensuring that the public employer assumes responsibility for the actions of its employees when they are acting within the scope of their employment. As legal cases like those discussed above highlight, whether an employee’s actions were within the scope of employment is often complex, and the courts will evaluate the facts of each case to determine whether indemnification is required.
Ultimately, the broad indemnification protections under Wisconsin law are intended to ensure that public employees can perform their duties without undue fear of personal liability, thereby promoting the effective functioning of public institutions.
