Defense and Indemnification for Baylor EmployeesSept. 13, 2012
Baylor has a policy to defend its employees (in most cases) in an effort to facilitate the accomplishment of its mission through the actions of its employees. However, Baylor's policy has its limits because Texas and federal law do not permit Baylor to defend its employees under all circumstances. Consequently, at best the answer is "maybe." The risk to individual employees is that personal resources can be lost if there is conduct for which Baylor cannot defend or indemnify the employee.
A tension is created between Baylor's goals and the external legal limitations. On one hand, Baylor's policy is to provide defense and indemnification of employees to facilitate accomplishment of Baylor's mission through its employees. It is appropriate for Baylor to provide assurance that Baylor will bear risks of operational choices made by its employees. On the other hand, Baylor is a non-profit institution whose resources are held in public trust to ensure resources are spent for the public purpose and not for individual benefit. As a result, the law has placed some limits on Baylor's ability to defend employees in lawsuits and indemnify employees for costs or judgments against them individually. To further complicate matters, the law makes it more difficult to defend and indemnify employees in criminal, as opposed to civil, cases, and also prohibits defense and indemnification in some cases.
Prohibited Defense and Indemnification
Defense and indemnification is prohibited by law in proceedings that determine that the person received an inappropriate personal benefit (for example, unreasonable salary or employment benefits) or is found liable to Baylor (for example, theft from Baylor).
The deadly fire in a laboratory at UCLA has brought this issue to the forefront of some ongoing conversations about lab safety. The local prosecutor in Los Angeles initiated criminal proceedings against UCLA and the professor because of the death of a graduate student in the fire. UCLA resolved the matter with the prosecutor, without resolving the case against the professor. What would Baylor have done in the UCLA criminal case?
To provide protection to the employee in the criminal case, Baylor would have to make a determination that the professor had no reasonable cause to believe his conduct was unlawful. There are two key words: "no" and "reasonable." This is not a subjective standard, but an absolute, objective one. If the employee (i) actually knew, or (ii) had reason to know, or (iii) should have known the conduct was unlawful, Baylor cannot defend the employee. The conclusion obviously will depend on a complete factual analysis, but it can be seen easily that Baylor may have made the same decision as UCLA.
In more typical cases that are not criminal in nature, Baylor would have to determine that the employee acted in "good faith" and had a "reasonable belief" that the conduct was in Baylor's best interest. As a result, reasonable behavior by an employee is a large part of the ability of Baylor to protect its employees. Because the reasonableness standard is objective, Baylor would and must analyze the conduct under all the facts and circumstances, not just the employee's knowledge and subjective conclusions.
The Reasonableness Standard Generally
"Reasonableness" is also a common social standard that applies to our legal liabilities to others. For example, the law of negligence requires everyone to operate a car reasonably--that is, doing what an ordinary, prudent person would do or not do under the same or similar circumstances. If you see risks as a Baylor employee address those risks--and address them in a reasonable manner. The reality is that failure to conduct yourself reasonably, as an individual or as a Baylor employee, puts you at personal risk.
If you are sued (or have concerns that you will be sued--or prosecuted) because of activities as a Baylor employee, you should contact the Office of General Counsel. Of course, you are always free to hire your own counsel at your expense. However, if you want Baylor to provide you a defense, and indemnification for any judgment against you, you must contact the Office of General Counsel so Baylor can evaluate, as it must do, whether Baylor can provide you counsel.
A Related Caveat
Attorneys for Baylor University are not attorneys for the individual employee, unless and until Baylor affirmatively decides to represent the individual employee. This typically means a couple things before makes such a decision: (i) Baylor attorneys cannot provide personal legal advice to the individual employee, and (ii) communications to the Baylor attorney will have to be disclosed to others, typically Baylor managers responsible for making Baylor decisions. For personal representation to be undertaken and continued by the Baylor attorneys, there can be no conflict of interest between Baylor and the individual.