What Is California Labor Code §3864: Third-Party Indemnity Agreements?

If an action as provided in this chapter prosecuted by the employee, the employer, or both jointly against the third person results in judgment against such third person, or settlement by such third person, the employer shall have no liability to reimburse or hold such third person harmless on such judgment or settlement in absence of a written agreement so to do executed prior to the injury.

What Is Labor Code 3864?

Labor Code 3864 says a third party cannot make the employer help pay a work injury judgment or settlement, unless the two sides had a written agreement first.

Some work injuries involve a person or company other than the employer. A delivery driver gets hit by another motorist. A warehouse worker is hurt by equipment a different company built or serviced. California lets the worker, the employer, or both together sue that outside party, often called the third party. That lawsuit can end with a court ordering a judgment, or with the parties agreeing to a settlement.

Reimburse means pay back. Hold harmless means protect someone from a loss or a legal claim. Labor Code 3864 says the employer does not have to do either one for the third party once a lawsuit like that is over, unless the employer put a written agreement in place before the injury. This exact rule has been part of California law since 1959 and has not changed since. It speaks to the employer and the third party only. It does not reduce what the injured worker can recover.

How Does Labor Code 3864 Work in a Real Claim?

The rule only matters after a lawsuit against the third party already ended in a judgment or a settlement.

Picture a worker hurt on a job site by a machine owned and serviced by another company. The worker still files a workers' compensation claim against the employer. Separately, the worker, the employer, or both together can sue the machine company under Labor Code 3852. Say that lawsuit ends with the machine company paying a judgment or agreeing to a settlement.

The machine company may look for help covering that cost. It might argue the employer should share the loss, since the employer's workers' compensation payments trace back to the same injury. Labor Code 3864 closes that door. The employer owes the machine company nothing from that judgment or settlement, unless the two companies already had a written deal saying otherwise, agreed to before the injury.

What Counts as a Written Agreement Made Before the Injury?

Only a written agreement signed ahead of the injury can require the employer to reimburse or protect the third party.

The statute is specific about timing. The agreement must be in writing. It must also be executed, meaning signed, prior to the injury. A spoken agreement does not count, no matter how clear it was at the time. A written agreement signed after the injury does not count either, even if it is signed the same week the injury happened.

This kind of clause often sits inside an ordinary business contract. A property owner might sign a lease with a tenant. A general contractor might sign a subcontract with a subcontractor. A company that owns equipment might sign a rental agreement with the business using that equipment. If one of those contracts already states that one side will reimburse or hold the other harmless for a work injury claim, Labor Code 3864 lets that agreement stand. If no such clause exists, the third party covers its own judgment or settlement.

How Does This Section Connect to the Other Third-Party Recovery Sections?

Labor Code 3864 is the last step in a chain of sections that starts with the right to sue a third party.

Five other sections work alongside Labor Code 3864. Each one covers a different step after someone other than the employer causes a work injury.

Reading Labor Code 3864 alone skips those earlier steps. They decide whether the third party owes anything in the first place. Labor Code 3864 only comes into play once that money has already changed hands.

What Should You Save or Ask About If a Third Party Is Involved?

Keep any written contract between the businesses involved, and check the date it was signed.

Keep a copy of any contract, lease, or agreement between the employer and the outside company, especially one with a reimbursement or hold-harmless clause. Note the date it was signed. Keep the judgment or settlement paperwork from the third-party case, along with the Labor Code 3856 order that divided the money.

Ask whether a written indemnity agreement existed ahead of the injury, not after. Ask for the signed date on that agreement, not just the date printed on the contract's cover page. A third-party injury claim running alongside a workers' compensation case has more moving parts than a typical claim, and this paperwork is easiest to sort out from the start.

A company asked to reimburse or protect a third party once a work injury lawsuit against it is over should ask for the exact paperwork behind that demand: the written agreement itself, and proof of when it was signed. The firm reviews each California workers' compensation matter individually, including a claim that also involves a third-party lawsuit. Call (661) 273-1780 or use the contact form to talk about a specific claim.