SCS CSHB 277(JUD): "An Act relating to public employers defending and indemnifying public employees and former public employees with respect to claims arising out of conduct that is within the scope of employment."

00SENATE CS FOR CS FOR HOUSE BILL NO. 277(JUD) 01 "An Act relating to public employers defending and indemnifying public employees 02 and former public employees with respect to claims arising out of conduct that 03 is within the scope of employment." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 23.40.075 is amended to read: 06  Sec. 23.40.075. ITEMS NOT SUBJECT TO BARGAINING. The parties may 07 not negotiate terms contrary to 08  (1) the reemployment rights for injured state employees under 09 AS 39.25.158; [OR] 10  (2) the reemployment rights of the organized militia under 11 AS 26.05.075; or 12  (3) the rights of an employer to discharge an employee when the 13 entry of a final judgment has made the employer liable for damages as the result 14 of the negligence of the employee under AS 39.55.050.

01 * Sec. 2. AS 39 is amended by adding a new chapter to read: 02 CHAPTER 55. DEFENSE AND INDEMNIFICATION OF 03 PUBLIC EMPLOYEES. 04  Sec. 39.55.010. PUBLIC EMPLOYER'S DUTY TO PROVIDE DEFENSE. 05 (a) Except as otherwise provided in this chapter, a public employer shall provide legal 06 defense of civil claims against, and pay settlements and judgments including attorney 07 fees and costs entered against, a public employee when the claims, settlements, or 08 judgments are based on acts or omissions that occurred during the course and within 09 the scope of the employee's employment with the public employer. 10  (b) A public employer does not have an obligation to defend or indemnify if 11 the 12  (1) acts or omissions at issue were a result of gross negligence or 13 intentional or wilful misconduct on the part of the employee; however, a public 14 employer may not, based solely on an allegation of gross negligence or intentional or 15 wilful misconduct made by a party other than the public employer, withhold legal 16 defense in a civil action; 17  (2) claim or action involves a disciplinary, administrative, or criminal 18 matter brought against the employee or is an appeal from a disciplinary, administrative, 19 or criminal action; 20  (3) civil claim or action is based on conduct for which the employee 21 has been convicted of a criminal offense or terminated from employment by the public 22 employer; or 23  (4) public employee settled or compromised the claim or action before 24 requesting the public employer to provide legal defense or indemnification or while 25 a request for defense was pending. 26  (c) Except for AS 39.55.050, this chapter does not apply if a collective 27 bargaining agreement that covers the employee includes a provision for defense and 28 indemnification, in which case the terms of the collective bargaining agreement apply. 29  (d) A public employer does not have an obligation to pay an award for 30 punitive damages against an employee. 31  (e) A public employer may adopt an internal policy or enter into an agreement

01 with an employee that requires the employer to defend or indemnify the employee or 02 pay punitive damages in circumstances in which the employer would not otherwise 03 have an obligation to do so. 04  (f) Defense or indemnification provided to a public employee under this 05 chapter does not constitute a waiver, limitation, or expansion of sovereign immunity 06 or of other immunity. 07  (g) A public employer that is obligated to provide legal defense under this 08 chapter shall, through its designated legal counsel, provide legal services to the 09 employee. The public employer has the right to determine which attorney shall 10 represent the employee. 11  (h) This chapter applies to a former employee to the same extent as a current 12 employee. 13  Sec. 39.55.020. EMPLOYEE'S DUTIES WHEN REQUESTING DEFENSE 14 AND INDEMNIFICATION. (a) A public employer's obligation to defend and 15 indemnify an employee under this chapter arises only if 16  (1) the employee notifies the public employer in writing, in the manner 17 required by the employer, within 10 days after receipt of a claim, demand, or suit, 18 unless there is good cause for the employee's failure to provide timely or proper notice 19 and the employer has not been materially prejudiced; and 20  (2) the employee makes a good faith effort to cooperate in the defense 21 and resolution of the claim or action. 22  (b) An employee for whom a public employer has provided legal defense 23 under this chapter or who has a request for the provision of legal defense pending may 24 not settle the claim brought against the employee unless the public employer approves 25 the settlement. 26  (c) An employer who has provided legal defense and indemnification may 27 settle a claim or action without the consent of the employee so long as the settlement 28 resolves all the outstanding claims against the employee. 29  Sec. 39.55.030. EMPLOYEE'S RIGHTS WHEN EMPLOYER REFUSES TO 30 PROVIDE LEGAL DEFENSE. (a) If a public employer refuses to provide legal 31 defense for an employee, the employer shall provide the employee with written notice

01 of this decision within 60 days after receiving a request for legal defense from the 02 employee or service of the summons and complaint on the employee, whichever is 03 later. The notice must include a copy of this chapter. 04  (b) An employee whose employer refuses to provide legal defense under this 05 chapter may file an action for declaratory relief in superior court if the employee wants 06 the employer to provide legal defense. The employee must file the action for 07 declaratory relief within 30 days after the employee received a written notice of refusal 08 to defend from the employer. 09  (c) If an employee who has been denied legal defense settles the claim or 10 action without filing a declaratory relief action under (b) of this section, the employee 11 waives any right to defense or indemnification. If the employee files a declaratory 12 relief action under (b) of this section, the employee may settle the claim for a 13 reasonable amount without the employer's consent. 14  (d) If an employee prevails in a declaratory relief action against the employer, 15 the employee may bring an action for indemnification no later than one year after the 16 final judgment in the declaratory relief action or final judgment or dismissal of the 17 underlying action, whichever is later. 18  Sec. 39.55.040. DEFENSE WITH RESERVATION OF RIGHTS; DENIAL OF 19 INDEMNIFICATION; EMPLOYEE LIABILITY FOR EXPENSES. (a) A public 20 employer may undertake the defense of an employee under this chapter while 21 contesting the obligation to indemnify the employee, either partially or fully. A public 22 employer that offers a defense with a reservation of rights to an employee, may 23 provide legal defense and place limitations on its agreement to indemnify an employee 24 pending the outcome of the case. 25  (b) If an employer denies indemnification or offers a defense with a 26 reservation of rights to an employee, the employer shall provide written notice to the 27 employee. The notice must include the reason for the denial or reservation of rights 28 and a copy of this chapter. 29  (c) If a final judgment is entered against an employee in a claim or action in 30 which the employer provided a legal defense and the employer agrees to only partially 31 indemnify the employee or denies indemnification entirely, the employee may bring

01 an action for indemnification against the employer not later than one year after the 02 entry of the final judgment against the employee. 03  (d) A public employer who has defended an employee may bring an action 04 against the employee for expenses incurred in the defense if the trier of fact found that 05 the employee's conduct was not within the course or scope of employment. The action 06 for expenses under this subsection must be brought not later than one year after the 07 execution of a written agreement settling the underlying claim or action or entry of 08 final judgment in the action. 09  Sec. 39.55.050. EMPLOYER'S RIGHT TO TERMINATE NEGLIGENT 10 EMPLOYEE. If, as the result of the entry of a final judgment, an employer who has 11 provided defense or indemnification under this chapter is found liable for damages that 12 were held to be at least in part the result of the negligence of an employee, the 13 employer may discharge the employee. The reversal or modification of a decision of 14 the superior court imposing liability on a public employer for the negligence of a 15 public employee does not give the public employee a right to reinstatement, back 16 wages, or other civil or equitable remedies against the public employer. A collective 17 bargaining contract entered into under AS 23.40.070 - 23.40.260 may not contain terms 18 contrary to this section. 19  Sec. 39.55.100. DEFINITIONS. In this chapter, 20  (1) "employee" or "public employee" means a person who performs a 21 service for wages or other remuneration under a direct contract of hire, written and 22 expressed, for a public employer and includes a member of a board or commission 23 established by the employer; "employee" or "public employee" does not include an 24 independent contractor; 25  (2) "employer" or "public employer" means the state, a public or 26 quasi-public corporation or authority established by state law, and a political 27 subdivision of the state including a municipality and a public or quasi-public 28 corporation established by a municipality; however, "employer" or "public employer" 29 does not include the University of Alaska, a municipal school district, or a rural 30 educational attendance area; 31  (3) "settlement" means the execution of a written agreement settling the

01 claim or action that gave rise to the employer's obligation to defend or indemnify the 02 public employee. 03 * Sec. 3. Nothing in this Act terminates or modifies a collective bargaining agreement in 04 effect on the effective date of this Act. 05 * Sec. 4. This Act applies only to claims and actions that arise on or after the effective 06 date of this Act.