No member of any local governing body is liable for the negligent act or omission of any appointee or employee appointed or employed by him in his official capacity, whether the appointment or employment was made singly or in conjunction with other members of the local governing body, unless the member or members of the local body making the appointment either:

(a) Knew or had noticed that the person appointed or employed was inefficient and incompetent to perform or render the service or services for which he was appointed or employed.

(b) Retained such inefficient or incompetent person after knowledge or notice of such inefficiency or incompetency.

SOURCE: GC § 3206.