By Michael Kaelber, Esq., Coordinator of Continuing Legal Education and Research
New Jersey school law provides for school employees who are sued for an act or omission arising out of their duties as an employee to be indemnified under certain situations. What does that mean and how does that work? In this article, we start with a look at the two statutes that address the issue of indemnification of school employees; N.J.S.A. 18A:16-6 (which covers civil actions) and N.J.S.A. 18A:16-6.1 (which covers criminal and quasi-criminal actions). We then review the impact of a December 21, 2023 New Jersey Superior Court Appellate Division decision in the case Azzaro v. BOE of City of Trenton, which further clarifies the obligations of employees and employers when seeking indemnification regarding civil actions.
Civil Actions, Administrative Actions or Other Legal Proceedings
When it comes to civil actions, like a lawsuit in New Jersey Superior Court, administrative actions, like a petition before the Commissioner of Education or the School Ethics Commission or other legal proceedings, N.J.S.A. 18A:16-6 controls. The law states:
Whenever any civil or administrative action or other legal proceeding has been or shall be brought against any person holding any office, position or employment under the jurisdiction of any board of education, including any student teacher or person assigned to other professional pre-teaching field experience, for any act or omission arising out of and in the course of the performance of the duties of such office, position, employment or student teaching or other assignment to professional field experience, the board shall defray all costs of defending such action, including reasonable counsel fees and expenses, together with costs of appeal, if any, and shall save harmless and protect such person from any financial loss resulting therefrom; provided that
a. no employee shall be entitled to be held harmless or have his defense costs defrayed in a disciplinary proceeding instituted against him by the board or when the employee is appealing an action taken by the board; and
b. indemnification for exemplary or punitive damages shall not be mandated and shall be governed by the standards and procedures set forth in N.J.S.59:10-4.
Any board of education may arrange for and maintain appropriate insurance to cover all such damages, losses and expenses.
Let’s parse that out. You need
- A civil or administrative action or other legal proceeding; something non-criminal.
- The person must be an employee under the board of education and must be the defendant. Someone must have sued the employee. The employee cannot be a plaintiff and be indemnified.
- It must be for an act or omission arising out of and in the course of the person’s duties as an employee. It cannot be for something done in the employee’s personal capacity.
If an employee checks all of the above boxes, then
- The board of education shall defray all costs of defending the employee, including reasonable attorney fees, win or lose, including costs of appeal.
- The board of education shall save harmless and protect the employee from any financial loss whatsoever resulting from defending the action.
The employee is indemnified win or lose. A couple of caveats, however.
One, the board of education may arrange for and maintain appropriate insurance coverage to cover all such losses and expenses; the insurance carrier is involved, assuming that the board of education has coverage. Many insurance carriers require, as a condition of coverage, that the employee use the attorney provided by the insurance carrier. While that may be a condition of coverage, nowhere in the statute does it require that the employee use the insurance carrier’s attorney. Employees, who are members of a union, in the school setting often NJEA or NJPSA, may often use the union attorney, who they perceive as better representing their interests. At this juncture there is often a discussion with the insurance company, the board and the employee as to the reasonableness of certain costs and what will be covered. However, the employee will still be indemnified by the board of education, provided they comply with a condition that was addressed in a recent decision and discussed later in this article.
Two, there is no indemnification for an employee who is the defendant in a disciplinary proceeding instituted against the employee by the board of education or when the employee is appealing an action taken by the board of education. No indemnification when an employee is defending tenure charges filed against the employee by the board of education. No indemnification when the employee appeals an increment withholding by the board of education. No indemnification when an employee contests a transfer from one building to another building and the employee believes the transfer is for disciplinary reasons.
Third, indemnification for exemplary or punitive damages, damages that are designed to punish and not just make the defendant whole, is not mandated. N.J.S.A. 59:10-4 addresses the standards and procedures by which exemplary or punitive damages may be indemnified.
Criminal or Quasi-Criminal Actions
When it comes to criminal actions or quasi-criminal actions like those in municipal court, N.J.S.A. 18A:16-6.1 controls. The law states:
Should any criminal or quasi-criminal action be instituted against any such person for any such act or omission and should such proceeding be dismissed or result in a final disposition in favor of such person, the board of education shall reimburse him for the cost of defending such proceeding, including reasonable counsel fees and expenses of the original hearing or trial and all appeals. No employee shall be entitled to be held harmless or have his defense costs defrayed as a result of a criminal or quasi-criminal complaint filed against the employee by or on behalf of the board of education.
Any board of education may arrange for and maintain appropriate insurance to cover all such damages, losses and expenses
Once again, let’s parse that out. You need
- A criminal or quasi-criminal action in which the employee is a defendant. An example of a quasi-criminal action may be where a school bus driver gets a ticket for speeding or running a red light while driving the school bus and must appear in municipal court. Another common example would be a case where a school administrator intervenes to break up a fight between two students and is then accused of a disorderly persons offense and required to appear in municipal court.
- The person must be an employee under the board of education and must be the defendant. The employee must have been charged in the criminal or quasi-criminal proceeding.
- It must be for an act or omission arising out of and in the course of the employee’s duties. It cannot be for something the employee has done do in the employee’s personal capacity.
- The employee must win the case. Pre-trial intervention is not eligible for indemnification. A plea bargain agreement to a lesser charge is not eligible for indemnification.
If an employee checks all of the above boxes, then
- The board of education shall defray all costs of defending the employee, including reasonable attorney fees, including costs of appeal, but only if the employee wins the case.
- The board of education shall save harmless and protect the employee from any financial loss whatsoever resulting from defending the action.
In a criminal or quasi-criminal case, the employee is indemnified only if the employee has a final disposition in the favor of the employee; the employee must win the case.
Even with a win, there are, like with civil matters, a few caveats:
- One, as with non-criminal actions, the board of education may arrange for and maintain appropriate insurance coverage to cover all such losses and expenses; the insurance carrier is involved. Many insurance carriers require, as a condition of coverage, that the employee use the attorney provided by the insurance carrier. While that may be a condition of coverage, nowhere in the statute does it require that the employee use the insurance carrier’s attorney. Employees, who are members of a union, in the school setting often NJEA or NJPSA, may often use the union attorney, who they perceive as better representing their interests. At this juncture there is often a discussion with the insurance company, the board and the employee as to the reasonableness of certain costs and what will be covered.
- Two, as with non-criminal actions, there is no indemnification for an employee when a criminal or quasi-criminal case is the result of a criminal or quasi-criminal complaint filed against the employee by or on behalf of the board of education.
Recent Decision
In a December 21, 2023 decision, Azzaro v. BOE of City of Trenton, the Appellate Division of New Jersey Superior Court addressed the novel issue of whether N.J.S.A. 18A:16-6 allows school board employees to wait until the final disposition of a civil or administrative action filed against them before seeking defense costs and indemnification from a board of education.
Petitioners had appealed from a September 14, 2022 Commissioner decision denying reimbursement of defense costs and indemnification. The case involved a former principal, union (NJEA) and law firm who requested that the board of education reimburse them for reasonable costs and attorney fees incurred in the successful defense of principal in investigation brought by the Department of Education, Office of Fiscal Accountability and Compliance (OFAC). The Administrative Law Judge (ALJ) issued an initial decision, granting indemnification in the amount of $430,800 in attorney fees and $5,361.60 in costs. The Commissioner disagreed with the ALJ and denied indemnification, noting that the petitioners failed to notify the Board of their request for indemnification until more than a decade of legal bills had accumulated.
The Appellate Division affirmed the Commissioner, concluding that an employee, seeking indemnification pursuant to N.J.S.A.18A:16-6 in a civil or administrative action, cannot wait until the action is completed and must provide the school board with reasonable notice after the initiation of the proceeding, unlike the procedure set forth in N.J.S.A. 18A:16-6.1, which provides that an employee cannot seek reimbursement of defense costs and indemnification until the conclusion of a criminal or quasi-criminal action.
The Appellate Division concluded that a sensible reading of N.J.S.A. 18A:16-6, when read in conjunction with N.J.S.A. 18A:16-6.1, would not permit a party to wait more than ten years to seek defense costs. Azzaro should have acted within a reasonable period of time after learning of the charges to put the Board on notice of her request for indemnification. What constitutes a reasonable time may be a fact-specific inquiry in certain cases. However, bringing an action twelve years after the initiation of an administrative action was not reasonable under the circumstances. The Commissioner’s decision was based on a reasonable interpretation of the statute, supported by sufficient credible evidence on the record as a whole and not arbitrary, capricious, or unreasonable.
Conclusion
New Jersey school law provides for school employees who are sued for an act or omission arising out of their duties as an employee to be indemnified under certain situations; win or lose in civil or administrative actions, win in criminal or quasi-criminal actions. By following the parameters set forth in this article, a board of education and its school administrators can make sound decisions as to whether indemnification should be granted.