Indiana Supreme Court Interprets--and Reinterprets--Indiana’s Blacklisting Statute

April 13, 2012
Legal Updates

The Indiana Supreme Court recently reexamined Indiana's Blacklisting Statute in Loparex, LLC v. MPI Release Technologies, LLC, Gerald Kerber, and Stephen Odders, No. 94S00-1109-CQ-546 (Ind. Mar. 21, 2012).  Indiana's Blacklisting Statute prohibits employers from "blacklisting" former employees, or in other words preventing former employees from gaining new employment by words or by action.  The Supreme Court in Loparex addressed, in part (1) whether an employee who voluntarily leaves employment may bring a suit against the former employer under the Blacklisting Statute; and (2) whether attorney's fees are available as compensatory damages under the Blacklisting Statute.

First, the Indiana Supreme Court reinterpreted the scope of the Blacklisting Statute.  In Wabash Railroad Co. v. Young, 69 N.E. 1003 (Ind. 1904), the court found that the portion of the Blacklisting Statute allowing employees who voluntarily left their employment to bring claims against their former employer for blacklisting violated the Indiana Constitution.  Therefore, Indiana courts have only permitted discharged employees to bring claims for blacklisting.  Based on amendments to the Indiana Constitution, the Indiana Supreme Court in Loparex has reinterpreted the statute to provide that employees who leave their employment voluntarily may also bring suits against former employers under the Blacklisting Statute.

Second, the Indiana Supreme Court determined that attorney's fees are not available to an employee under the Blacklisting Statute as part of compensatory damages.  The justices explained that nothing in the statute's language, history, or nature indicates that the American Rule—which requires each party to pay his or her own attorney's fees—should not apply.  The Court pointed out that the Blacklisting Statute limited damages to compensatory and exemplary damages, leaving no room to include attorney's fees as damages.

As a result of Loparex, Indiana employers should be mindful that blacklisting claims can now be brought by employees that leave employment both voluntarily and involuntarily. As always, employers are advised to word with care any post-employment recommendations/comments to prevent claims such as blacklisting. Employers can reduce their risk of a blacklisting claim by implementing a neutral reference policy, whereby a point person in the company gives prospective employers only the former employee's position held and dates of employment.