24 MARCH / APRIL 2018 HUMAN RESOURCES Debra A. Mastrian Partner SmithAmundsen LLC dmastrian@salawus.com SmithAmundsen LLC is a Diamond Associate Member of the Indiana Bankers Association. Article author Spoliation Issues The importance of preserving records Employers are faced with various record retention requirements under state and federal law for both electronic and hard copy records. These records include: personnel and employment records (job applications, resumes, records relating to hiring or firing, rates of pay); payroll records; employment agreements; time sheets/time cards or other records showing total hours worked and workweek; records relating to discrimination charges and actions; records relating to gender and occupation of employees, and basis for wage differential; I-9 forms, Family and Medical Leave Act notices and policies; payroll withholding forms; and ERISA (Employee Retirement Income Security Act) plan disclosures. Spoliation is a term used to describe what happens when records or other evidence are destroyed, lost or otherwise not preserved. When facing the threat or reasonable prospect of litigation, each party to the litigation has a duty to preserve potentially relevant information, including electronically stored information (e.g., emails). Employers should therefore issue a “litigation hold” to suspend the normal document destruction practices, and should put procedures in place to preserve potentially relevant records. The failure to preserve records by a party to the litigation does not give rise to an independent claim for “first-party” spoliation (loss or destruction of evidence by a party) under Indiana law: Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d 349 (Ind. 2005). However, courts may sanction parties for spoliation. Those sanctions may include evidentiary inferences that the spoliated evidence was unfavorable to the responsible party; or discovery sanctions, such as ordering the designated facts be presumed as established, prohibiting introduction of evidence, dismissal of all or part of a lawsuit, default judgment against the responsible party, and/ or payment of reasonable expenses, including attorneys’ fees. Regulatory agencies, including the Equal Employment Opportunity Commission, have successfully moved for sanctions against employers who have failed to produce relevant documents in litigation pending against them. Sanctions have included prohibiting the employer from presenting certain evidence in the employer’s defense. Employers in Indiana must also be aware of potential liability for “third-party” spoliation (loss or destruction of evidence by a non-party). Recently the Indiana Court of Appeals, in Shirey v. Flenar, Case No. 02A03-1704-MI-876 (Dec.21, 2017), recognized a third-party spoliation claim against a doctor who failed to maintain records of a patient. The patient had been injured in a car accident. The patient’s lawyer requested the medical records in connection with the accident. The doctor failed to respond to the request, and the records eventually were destroyed by the doctor’s medical-records software provider. The patient sued the doctor, in part, for spoliation of evidence, claiming that without the records, she was unable to substantiate her personal injury claim. Spoliation may be intentional or negligent. In recognizing the right to bring a third-party claim for negligent spoliation, the Flenar court found that the doctor had a duty to preserve the records, given: (1) the relationship between the parties, (2) the reasonable foreseeability of harm to the person injured, and (3) public policy concerns. The court noted that recognizing a duty did not impose additional burden on the doctor, because he was obligated under the law to preserve the records. (The other elements of the claim – breach, causation and damages – were not addressed by the parties or court.)
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