Penny v. Review Bd.

• Decision Date: 18 August 2006
• Docket Number: No. 93A02-0506-EX-577.,93A02-0506-EX-577.
• Citation: 852 N.E.2d 954
• Parties: Sandra K. PENNY, Appellant, v. REVIEW BOARD OF the INDIANA DEPARTMENT OF WORKFORCE DEVELOPMENT, Appellee.
• Court: Indiana Appellate Court

852 N.E.2d 954

Sandra K. PENNY, Appellant, v. REVIEW BOARD OF the INDIANA DEPARTMENT OF WORKFORCE DEVELOPMENT, Appellee.

No. 93A02-0506-EX-577.

Court of Appeals of Indiana.

August 18, 2006.

William C. Moyer, Lorch & Naville, LLC, New Albany, IN, Attorney for Appellant.

Steve Carter, Attorney General of Indiana, Elizabeth Rogers, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.

OPINION

MAY, Judge.

The Indiana Department of Workforce Development ("the Department") determined Sandra Penny failed to disclose earnings while she was receiving unemployment benefits. She was disqualified for unemployment benefits and ordered to repay the excess benefits she received. The Review Board affirmed. Penny asserts on appeal the Review Board should not have penalized her for improperly receiving unemployment benefits because she had immunity pursuant to Ind.Code § 22-4-17-9.

We agree the statute provided Penny immunity, and the Department, having invoked the statute to force Penny to testify, cannot now subject her to a penalty or forfeiture based on the information she provided. However, the Board's order that Penny repay benefits to which she was not entitled was not a "penalty," and the immunity the statute provides does not protect her from that part of the order.¹ We accordingly affirm in part and reverse in part.²

FACTS AND PROCEDURAL HISTORY

Penny applied for unemployment benefits in August of 2003 and claimed benefits through November of 2003. She indicated she had no earnings during that period, but she was employed by an American Legion post, earning about $600.00 a month. She also had earnings from other sources she did not report to the Department while claiming unemployment benefits. Penny reopened her claim in May of 2004 and again collected unemployment benefits without fully reporting earnings from employment.

In September 2004, an investigator for the Department told Penny she was under investigation and asked her to appear for an interview. Penny agreed to appear but advised the Department she planned to claim a privilege against self-incrimination and the Department would have to subpoena her to compel her testimony. This, Penny indicated, would entitle her to the protection of Ind.Code § 22-4-17-9, which states in pertinent part:

no individual shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which he is compelled after having claimed his privilege against self-incrimination to testify or produce evidence, documentary or otherwise, except that such individual so testifying shall not be exempt from prosecution and punishment for perjury committed in so testifying. Any testimony or evidence submitted in due course before the board, review board, an administrative law judge, or any duly authorized representative of any of them shall be deemed a communication presumptively privileged with respect to any civil action except actions to enforce the provisions of this article.

The Department issued a subpoena, Penny provided a statement, and the investigator determined Penny falsified or knowingly failed to disclose information about her earnings and thus received benefits to which she was not entitled. Penny requested a hearing before an administrative law judge, at which hearing she moved to dismiss on the ground she had immunity and could not be subjected to penalties. The ALJ denied the motion on the ground Penny's statement had not furthered the Department's investigation. He stated Penny's claim of privilege "does not prevent the Department from using evidence [the investigator] had already gathered...." (App. at 2.) The Review Board adopted the ALJ's findings of fact and conclusions of law and affirmed.

DISCUSSION AND DECISION

When reviewing a decision by the Review Board, we determine whether the decision of the Board is reasonable in light of its findings. Hughey v. Review Board, 639 N.E.2d 1044, 1045 (Ind.Ct.App. 1994), trans. denied. The Board's findings of fact are generally conclusive and binding on us, Winder v. Review Board, 528 N.E.2d 854, 856 (Ind.Ct.App.1988), but when an appeal involves a question of law, we are not bound by the Board's interpretation of the law; we instead determine whether the Board correctly interpreted the law and correctly applied the applicable law. Hughey, 639 N.E.2d at 1046. The parties appear to agree this appeal involves the interpretation of Ind.Code § 22-4-17-9. As we are resolving a question of law, we review the Board's decision de novo.

1. The Nature of the Immunity

Penny argues at some length the statute provides transactional immunity, rather than use immunity or derivative use immunity. The Department does not address in its brief the nature of the immunity the statute provides. Instead, it argues the statute does not apply to actions to enforce the unemployment statutes. We need not decide the nature of the immunity the statute provides to resolve the case before us.³

The immunity provided in Ind.Code § 22-4-17-9 becomes available after an individual "is compelled after having claimed his privilege against self-incrimination to testify or produce evidence ...." The Department does not dispute Penny claimed the privilege and was compelled to testify.

The Department finds an exception to the statute's protection in the final sentence: "Any testimony or evidence submitted in due course before the board, review board, an administrative law judge, or any duly authorized representative of any of them shall be deemed a communication presumptively privileged with respect to any civil action except actions to enforce the provisions of this article." Ind.Code § 22-4-17-9 (emphasis supplied). Therefore, the Department asserts, the statute explicitly allows any testimony or evidence submitted before the Department to be used in actions to enforce the unemployment compensation act. Penny, the Department says, "appears to ignore the last sentence of the statute." (Br. of Appellee Review Board at 11.)

Penny does not; she instead correctly reads the statute as addressing two distinct matters—the scope of the privilege and the scope of the immunity provided. "Firstly, an individual who is compelled to testify enjoys transactional immunity. Secondly, any testimony (whether compelled or not) will be treated as privileged in any civil action." (Appellant's Reply Br. at 2) (emphasis in original). The last sentence of the statute, she asserts, addresses only the privilege and not the immunity, so it is not relevant to the issue before us.

Penny's interpretation is consistent with our prior decisions addressing this section, all of which indicate the "privilege" section of the statute is intended to protect from libel or defamation actions employers who provide information about an unemployment claimant's termination from employment.

In Ernst v. Ind. Bell Tel. Co., 475 N.E.2d 351, 353 (Ind.Ct.App.1985), Ernst filed for unemployment benefits and Indiana Bell told the Department Ernst had not been injured on the job. This, Ernst alleged, "probably had an effect on cutting me off from some possible benefits there" and amounted to defamation. Id. We noted the Department must promptly make a determination of eligibility when an individual files an unemployment claim, and if the employer knows facts that might affect the claimant's eligibility it "shall notify the [Department] of such facts promptly." Id. (citing Ind.Code § 22-4-17-2(c)). Because of this affirmative duty, Indiana Bell's statements did not constitute actionable defamation.

Ernst argued he did not, by filing an unemployment claim, consent to defamatory remarks made with malice or indifference to truth or falsity. We noted communications made in the course of unemployment administrative hearings are privileged, citing Ind.Code § 22-4-17-9, and determined nothing in Indiana Bell's statements caused the privilege to be lost. Id. at 356.

Similarly, Lawson v. Howmet Aluminum Corp., 449 N.E.2d 1172 (Ind.Ct.App. 1983), involved a defamation action arising out of statements an employer made to the Department in response to an unemployment claim. Howmet fired Lawson and accused him of vandalizing company property, and Lawson sued for defamation. We noted the statement made to the Employment Security Department was, by statute, protected by a qualified privilege. Id. at 1175 (citing Ind.Code § 22-4-17-9). We affirmed summary judgment for Howmet.

We found no Indiana decisions addressing the effect of the privilege against self-incrimination when a claimant is compelled to testify.⁴ It is apparent from the decisions cited above and from the language of the statute that the statute does, as Penny asserts, address two different matters— protection from penalties that might follow from testimony compelled after the assertion of the privilege against self-incrimination, and protection from libel or defamation actions for employers who are obliged to provide information about the reason a former employee was discharged. "The issue at hand, however, is what is the scope of the immunity—not the scope of the privilege—granted by I.C. 22-4-17-9." (Appellant's Reply Br. at 2.)

Neither party directs us to decisions from Indiana or elsewhere that directly address this type of statutory immunity. However, one such decision was found, and it is consistent with Penny's interpretation of the statute. In Escamilla v. Superior Court, 271 Cal.App.2d 730, 76 Cal.Rptr. 704 (1969), Escamilla and her husband worked for the same employer. Escamilla was arrested on suspicion of theft from the employer, and her husband was fired. The husband applied for unemployment insurance and a hearing was held before a referee for the California Unemployment Insurance Appeals Board. The employer asserted the husband would have been discharged for his own misconduct much earlier but it was feared that might impair the criminal investigation of...