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Volume XIII, Number 37

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February 03, 2023

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Indiana Supreme Court Favors Employee Over Interpretation of “Public Policy” Exception to At-Will Employment

In Perkins v. Memorial Hospital of South Bend (Case No. 20S-CT-233), a split Indiana Supreme Court ruled in favor of an employee who was discharged after testifying against Memorial Hospital of South Bend at a coworker’s unemployment compensation hearing. In its decision, the supreme court reiterated and reaffirmed Indiana’s strong presumption of at-will employment and discussed, but declined to create, an exception for voluntary witness testimony at unemployment hearings. Instead, the court remanded the case for a factual analysis of whether the employee had a “duty” to testify, leaving it to the fact finder to decide whether the employee was, without a paper subpoena, “constructively” compelled to testify at an unemployment hearing.

Background

Forrest Perkins worked as a police officer at Memorial Hospital of South Bend. In May 2015, Perkins left work early to testify at an unemployment benefits appeal against Memorial on behalf of a former coworker. Perkins believed he was being subpoenaed to testify and would receive a subpoena at the hearing. However, once at the hearing, the hearing officer told Perkins that a subpoena “wasn’t needed” to testify, and he never received one.

A month later, it was reported that Perkins stole gravy from the hospital cafeteria by failing to open his to-go container at the cashier stand and, although not previously disciplined, that he purportedly also took two biscuits without paying for them. Memorial fired Perkins for theft of food in violation of its rules of conduct. Perkins sued Memorial for wrongful termination, alleging its reason was pretextual and the true reason for the termination of his employment was retaliation for his adverse testimony at the unemployment hearing a month prior.

In its dispositive motion, Memorial argued to the trial court that Perkins was discharged for a valid, lawful reason. Memorial further claimed that, even if Perkin’s allegations were true, his testifying without a subpoena would not have barred his firing because it was not an exercise of a clear statutory right or duty nor would his refusal to testify have been an illegal act for which he personally was liable. Therefore, Memorial posited, his testimony did not fall within any recognized public policy exception.

The trial court agreed with Memorial and dismissed Perkins’ claim, concluding that because Perkins was not served with a subpoena, he was not afforded the protection of Indiana’s limited exceptions to at-will employment. A split court of appeals affirmed the trial court’s grant of Memorial’s motion for summary judgment, in spite of Judge Kirsch’s dissent that “common sense tells us that this is not good law.”

The supreme court majority reversed, holding that although there was no “clear statutory expression of a right or a duty” to testify, the case should be remanded to determine whether, when a hearing officer departs from the regulations by failing to provide a subpoena, Memorial established without dispute that Perkins voluntarily chose to testify and would not have been immediately compelled to testify had he refused.

Justice Slaughter’s dissent decried what in his opinion was an unnecessary blurring of a bright-line rule and found that in both fact and law there was no applicable exception. Slaughter argued that Perkins could not have reasonably believed he had a “duty to cooperate with an unissued, non-existent subpoena,” a duty to attend the hearing, or a duty to testify at the hearing.

Indiana’s Public Policy Exceptions To At-Will Employment

In Indiana, at-will employees may be discharged with or without reason. This presumption of at-will employment is strong, and Indiana courts have been disinclined to adopt broad and ill-defined exceptions to the doctrine. One of three exceptions that the Indiana Supreme Court has recognized is situations in which an employee: (a) is exercising a clear statutory right or obeying a legal duty or (b) refuses to commit an illegal act for which he would be personally liable;

Perkins presented two theories of why his testimony should be protected. First, Perkins asked the court to expand the public policy exception to cover all testimony by witnesses in unemployment hearings, voluntary or not. Second, Perkins argued that he sincerely, albeit mistakenly, believed that he would be given a subpoena that would have required him to testify and that this presented an issue of fact sufficient to defeat summary judgment. Memorial contended that because Perkins never received a valid subpoena, his testimony was purely voluntary and thus, not protected by any public policy exception.

The supreme court analyzed Perkins’ case in light of a trio of public policy exception cases, ultimately declining to endorse the broad categorical distinctions proposed by Perkins. However, given the novel facts of the case, the supreme court determined that the trial court’s summary dismissal was inappropriate.

In reaching its decision, the supreme court viewed Perkins’s decision to attend the unemployment hearing as a reasonable attempt to cooperate with service of process. The supreme court held that, even in the absence of explicit statutory protection, an unemployment hearing witness has a clear duty to cooperate with service of process “from the moment he first believes he is being served with a subpoena.” Recognizing the critical importance of an administrative law judge (ALJ) being able to compel the testimony of a third-party witness, the supreme court determined that ordinarily a witness should not be held liable for technical or procedural defects in the hearing officer’s order.

Justice Massa, writing for the majority, explained “[a]llowing employers to fire an employee merely because of a small technical mistake by the hearing officer” would create the very “fear of retaliation” contemplated by the public policy exception. Moreover, because Perkins could still have been compelled to testify without a physical subpoena, the court could not conclude that Perkins choice to testify was purely voluntary.

Reasoning that Memorial had not shown that Perkins voluntarily chose to testify or that he would not have been immediately compelled to testify if he had refused, the supreme court reversed and remanded for further proceedings.

Key Takeaways

The Supreme Court’s decision, which stopped short of adding a new exception to employment at will or a per se expansion of the current exceptions, does highlight the factual nuances of the current, narrow public policy exception. Here, the court undertook a factual analysis regarding whether Perkins had a legal duty to testify under Indiana law when he was not obligated to do so by a subpoena. If he did have a duty, the public policy exception would apply and his discharge would have been unlawful. However, if Perkins’s testimony was completely voluntary and he was not “constructively compelled” to testify, then no legal right or duty is implicated and no exception applies. Judge Massa concluded that “[s]ince [Perkins] would be personally responsible for violating his duties [once he had been subpoenaed] he may be protected by the public policy exception.”

Some previous lawsuits invoking exceptions to at-will employment have provided a clearer set of facts, i.e., under the Frampton line of cases and the cases under McClanahan v. Remington Freight Lines, where an employee was fired for refusing to break the law for which he personally could be liable. However, employees who believe they wrongfully have been discharged have endeavored over the years to stretch those narrow factual nets. Some have claimed that they were fired for refusing to commit an act which they believed was illegal but was not, or refused to commit an act which was illegal but for which they would not be personally liable (i.e., whistleblowing about an employer’s generally unlawful activity). Others have alleged a right or duty which did not have a statutory basis, as is required by the public-policy-exception precedents. Perkins attempted to bring his act within an exception by arguing it was not truly voluntary, and that he had an honest belief that he had an obligation or right to testify.

The court’s attempt to determine whether Perkins qualified for an exception to the at-will doctrine exposes the difficulty in interpreting what constitutes a legal right or duty or a refusal to obey a law that results in personal liability. The lower courts found Perkins had no statutory right to testify, nor did he have a statutory duty to do so absent a subpoena. The supreme court probed whether, if a witness believes he is required to testify in response to a lawful subpoena provided by statute (Ind. Code 22-4-19-8), he falls within the duty-to-testify exception. The supreme court considered Perkin’s decision to attend the unemployment hearing as a reasonable attempt to “fulfill a clearly defined and applicable duty to cooperate with service of process” and conceded that it could not conclude as a matter of law, considering the outstanding subpoena request, that Perkins would have escaped legal jeopardy if he refused to testify once he appeared at the hearing. Judge Massa explained that even without an explicit statutory protection, Perkins had a clear duty to cooperate with service of process from the moment he first believed he was being served with a subpoena, and once he had been subpoenaed by the ALJ he had a duty to appear and testify. Also buttressing this view, the court concluded that once he appeared, he could have been compelled to testify without a physical subpoena, and once he was testifying under oath, he had a duty to testify truthfully and could not refuse to answer questions or leave the hearing to avoid questioning. On these facts, Perkins could personally be responsible for violating any of these duties and might be protected by the public policy exception.

The supreme court appeared to share the basis for Judge Kirsch’s dissent at the court of appeals and his reaction to some of the underlying facts in this case. For example, Memorial chose not to appear at the hearing to contest the coworker’s request for unemployment benefits so Perkins’s testimony may not have been dispositive or have impacted the outcome of the appeal. Further, the reason Memorial even was aware of Perkins’s testimony was unconventional at best—his supervisor read the emails on Perkins’s cell phone that revealed why he was leaving early and then traveled to the hearing location to spot Perkins’s vehicle in the parking lot. Moreover, as noted by Judge Kirsch, the termination reason itself appeared pretextual. (Perkins had never previously been disciplined, and this “theft” over several months consisted of stealing one helping of gravy and two breakfast biscuits. For purposes of summary judgment, the parties agreed that Perkins was actually fired in retaliation for his testimony.) So, Memorial suffered no consequence for its arguably retaliatory unlawful behavior, while Perkins testified truthfully and lost his job. The supreme court sympathized with Perkins, stating it saw “no reason why the ALJ’s non-compliance with the written regulations should unilaterally benefit Memorial.”

The case serves as a reminder that, as the court noted, “it is best practice for coworker-witnesses to confirm they have a subpoena in hand before testifying.” Had that been the case here, this litigation would not have been necessary.

The case serves as a warning to Indiana employers not to be lulled into feeling immune from risk for firing an at-will employee. As this case shows, whether an employee reasonably was attempting to fulfill a legal duty or exercise a legal right is ultimately a question of fact that may defeat summary judgment. Also evident from this decision is that facts matter—the relatively minor offence for which Perkins was fired and the “cloak and dagger”-like means by which Memorial discovered his whereabouts at the hearing likely weighed in his favor. If the case goes to trial, those elements might be perceived by jurors as “unfairness” and/or overreach to the extent they would impact a jury decision.

In some ways, this decision poses more questions than it answers and calls into question the previously unwavering requirement that there be an explicit statute that creates the duty or establishes the right that might serve as a basis for an exception to the employment at-will doctrine.  It also reminds employers that although Indiana’s at-will doctrine is strong, they should not assume it is impenetrable. It is not unusual for an employer to assume that there is little or no risk of discharging an at-will employee, especially if it appears that the individual does not have a basis for bringing a wrongful termination suit based on discrimination against some protected characteristic—race, gender, age, religion, disability, etc. That is a dangerous assumption. As Perkins v. Memorial reveals, unless an employer can eliminate any implicit duty or right upon which the discharged employee may have acted, there may be a risk. Like any termination decision, employers may want to carefully and honestly asses the facts and circumstances to be sure there is no evidence of retaliatory animus, real or perceived.

© 2023, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.National Law Review, Volume X, Number 118
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About this Author

Jan Michelsen employment discrimination litigation attorney Indianapolis Ogletree Deakins
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Jan Michelsen concentrates her practice in counseling and defending management in a wide range of labor and employment law matters, including employment discrimination litigation, EEOC and administrative agency charges, and complaints, sexual harassment, the ADEA, the ADA, the FMLA, WARN, in federal and state courts and before regulatory agencies.  She also counsels in the area of employment contract disputes, employee privacy issues, social media electronic communications, wage and hour issues, wrongful discharge claims, and other state tort claims, such as defamation and negligent...

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Steven A. Baldwin Employment Litigation Attorney Ogletree Deakins Indianapolis, IN
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Steven is an employment litigation associate in Ogletree Deakins’ Indianapolis office. He defends employers against allegations of discrimination, harassment, retaliation, and wage-and-hour violations. He also focuses his practice on non-compete and non-solicitation litigation, and employment agreement disputes. Before joining Ogletree Deakins, Steven worked at a law firm representing clients in a wide range of civil cases, including commercial litigation and insurance coverage lawsuits.

Steven graduated cum laude from Notre Dame Law School in 2017. At graduation, he was...

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