## Facts

- American Consulting hired Lynette Schuck on January 14, 2005, as a safety instructor under a written employment agreement.
- The agreement required Schuck to complete in-house training on safety compliance (including OSHA/EPA standards) and company business functions during a 180-day probationary period.
- Section 12 stated the training would “cost” the employee $3,000, payable by reimbursement within the first 12 months; if the employee stayed employed for 12 continuous months, no reimbursement was owed.
- Section 12 included a sliding repayment scale that reduced the amount owed depending on how long the employee remained employed before leaving.
- The training Schuck received consisted of approximately one day of videos/quizzes and about twelve and a half days shadowing a coworker.
- Schuck was paid her regular wage ($9/hour) during training; the employer did not show an identifiable, separate $3,000 out-of-pocket training expense.
- About five months after starting, Schuck resigned due to medical issues related to pregnancy.
- American Consulting demanded $1,500 (half of the stated $3,000), consistent with the contractual schedule for leaving around that time.

## Issues

1. Whether Section 12’s $3,000 training-repayment provision was an enforceable liquidated-damages clause or an unenforceable penalty under Indiana law.
2. If the clause was unenforceable, what amount (if any) the employer could recover based on actual, provable training-related loss.

## Decision

- The trial court found Section 12 operated as a penalty rather than valid liquidated damages.
- The trial court calculated the employer’s identifiable training-related expense as wages paid during the training period ($936) and limited recovery to $468 because the employer sought only half of the contractual amount.
- The Indiana Court of Appeals affirmed.
- The appellate court agreed the stipulated sum did not reasonably relate to actual or anticipated loss and therefore was unenforceable as liquidated damages.

## Legal Principles

- A liquidated-damages clause is enforceable only if (1) damages were uncertain or difficult to ascertain at contracting, and (2) the stipulated amount was a reasonable estimate of probable loss.
- A stipulated sum that is disproportionate to anticipated or actual damages functions as an unenforceable penalty.
- Evidence that actual loss is readily quantifiable weighs against enforcing a large fixed payment as liquidated damages.
- A sliding-scale repayment schedule does not validate a clause when the base amount is itself not a reasonable estimate of probable loss.

## Conclusion

The court enforced Indiana’s distinction between liquidated damages and penalties by refusing to enforce a $3,000 training-repayment figure that bore no reasonable relationship to the employer’s measurable training costs, limiting recovery to the portion supported by actual evidence of loss.


Am. Consulting Env't Safety Servs., Inc. v. Schuck, 888 N.E.2d 874 (Ind. Ct. App. 2008)