A number of significant changes to Indiana employment law took effect on July 1, 2015. These changes affected employer’s obligations in areas such as hiring, wages, discrimination, and termination. If employers have not already done so, they should review and revise their policies and procedures to ensure that they are in compliance with these changes.

1. Veterans Preference Policies

A new Indiana statute allows private employers to adopt voluntary veterans preference policies. Specifically, it allows employers to give preference for hiring, promoting, or retaining a veteran over another qualified applicant or employee.

The statute provides that a covered veteran is an individual who has served and was released, under conditions other than dishonorable, from active duty in the United States Armed Forces or Reserves, the Indiana Army National Guard, or the Indiana Air National Guard. To be eligible for the preference, a private employer may require the veteran to submit a U.S. Department of Defense Report of Separation form (DD 214). The Indiana Department of Veterans Affairs will assist a private employer in determining whether an applicant qualifies as a veteran.

If an employer adopts a veterans preference policy, the policy must be in writing and be applied uniformly to employment decisions regarding hiring, promotion, or retention during a reduction in force. Additionally, a veterans preference policy cannot conflict with or change an employer’s obligations under a preexisting collective bargaining agreement, the federal National Labor Relations Act, or the federal Uniformed Services Employment and Reemployment Rights Act.

2. Wage Payment and Wage Claim Statutes

On May 5, 2015, Governor Pence signed into law amendments to the Indiana Wage Payment Statute and the Indiana Wage Claims Statute. The Wage Payment Statute governs the frequency of payment and the method of payment that an employer must provide its employees. It applies to current employees or employees who have voluntarily left their jobs and are still owed wages from a former employer. The Wage Claims Statute, on the other hand, applies to employees who have been involuntarily separated from employment by their employer and to employees whose work has been suspended as a result of an industrial dispute—such as a strike—and who are still owed wages from their former employer. 

Previously, the statutes provided for strict remedies involving liquidated damages. If an employer fails to pay wages to an employee or a former employee for any reason, under either statute the employer was subject to liquidated damages comprised of unpaid wages (plus an additional 10 percent for each day the wages went unpaid, not to exceed double the amount of wages due) and attorneys’ fees.  

For a plaintiff to receive liquidated damages, the new statutes require a plaintiff to show that an employer’s failure to pay wages was not in good faith. Specifically, the statutes provide that an employer that fails to make timely payment of wages, or withholds wages, shall pay the wages due, a reasonable fee for the plaintiffs’ attorney, and court costs. In addition, if a court finds that the failure to pay the employee was not in good faith, the court must order that the employee be paid liquidated damages in an amount equal to two times the amount of wages due the employee.

The statutes do not define “good faith.” However, Indiana has closely aligned its wage and hour statutes with the federal Fair Labor Standards Act (FLSA). Under the FLSA, an employer’s good faith is determined by the employer’s actual state of mind. Good faith “requires that the employer have honesty of intention and no knowledge of circumstances which ought to put the employer upon inquiry.” The objective test is whether the employer, in acting or omitting to act as it did, and in relying upon a regulation, order, ruling, approval, interpretation, administrative practice or enforcement policy, acted as a reasonably prudent person would have acted under the same or similar circumstances. Ultimately, however, it remains uncertain how the courts will define “good faith” under the new statute.

Finally, in addition to other valid wage assignments, the new statute provides that employees may now assign wages for

  • the purchase, rental, or use of uniforms or equipment that are necessary to fulfill the duties of employment;
  • reimbursement for education or employee skills training;
  • an advance for payroll or vacation pay; and
  • merchandise, goods, or food offered by the employer, for the employee’s benefit, use, or consumption, at the written request of the employee.

There are some exceptions to the wage assignment provisions of the amendment. The total amount of wages assigned may not exceed the lesser of either $2,500 per year or 5 percent of the employee’s weekly disposable earnings. Also, wages may not be assigned for education or employee skills training that were provided through an economic development incentive from a federal, state, or local program.

3. Religious Freedom and Restoration Act

On March 26, 2015, Governor Pence signed Senate Bill 101 into law. Which

[p]rohibits a governmental entity from substantially burdening a person’s exercise of religion, even if the burden results from a rule of general applicability, unless the governmental entity can demonstrate that the burden: (1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering the compelling governmental interest.  

The Act explicitly states that it is not intended and shall not be construed or interpreted to create a claim or private cause of action against any private employer by any applicant, employee, or former employee.

After significant debate about the law’s meaning, Governor Pence signed an amendment to the statute on April 2, 2015 to include anti-discrimination safeguards. Specifically, the act states that it does not 

authorize a provider to refuse to offer or provide services, facilities, and use of public accommodations, goods, employment, or housing to any member or members of the general public on the basis of race, color, religion, ancestry, age, national origin, disability, sex, sexual orientation, gender identity, or United States military service.

The law also does not establish a defense to a civil action or criminal prosecution for any of those actions, nor does it negate any rights available under the state constitution.

4. Protective Orders in the Workplace

Indiana law currently permits employers to seek an injunction or temporary restraining order on behalf of any employee who is the subject of unlawful violence in the workplace or who receives a credible threat of violence that could be carried out in the workplace. Injunctions are intended to prohibit further unlawful violence or threats of violence in the workplace. The law also prohibits employers from seeking to prohibit free speech or other constitutionally protected activities. The law does not modify any duty employers might have to provide a safe workplace for employees and other persons.  

As amended by House Enrolled Act No. 1159, Indiana law prohibits employers from discharging an employee for filing a petition for a protective order (whether or not the protective order has been issued) or for the actions of an individual against whom the employee has filed a protective order. An employee and employer may mutually agree to alter an employee’s worksite, compensation, or benefits, or a term or condition of employment in response to the employee’s filing of a protective order.

5. Repeal of the Common Construction Wage Statute

As of July 1, 2015, the Common Construction Wage Act (CCWA), which set hourly wages for public works projects, was repealed. According to the Indiana Department of Labor, contractors working on Common Construction Wage projects that were awarded prior to July 1, 2015 must continue to comply with the CCWA and, accordingly, pay their workers at or above the CCWA’s established wage and fringe benefit rates for the duration of the project. Contractors working on Common Construction Wage projects that were awarded on or after July 1, 2015 are prohibited from establishing a wage scale or wage schedule for public works projects, unless federal or state law provides otherwise.

In light of these changes to Indiana law, it is important for employers to ensure that their company policies are up to date to avoid costly monetary and/or administrative consequences.