On July 1, 2015, several long-awaited changes to the Indiana Wage Payment and Wage Assignment statutes go into effect. The amendments were made without significant fanfare, but provide some much needed changes for employers with operations or employees in Indiana. 

First, the penalties that can be assessed under the Indiana Wage Payment Statute have been amended. Prior to July 1, 2015, employers who failed to pay any portion of an employee's wages on the date they were due were subject to automatic liquidated damages in the amount of 10 percent of the unpaid wages per day they were past due, up to double the amount of the wages owed – regardless of the reason that the wages were not paid. Now, a court will award liquidated damages in an amount of double the actual wages owed only if the court finds that the employer was not acting in "good faith." While good faith is not defined in the statute, this change should allow employers who made an honest mistake to correct their error without being subject to double damages automatically.

Second, some changes and additions were made to the categories of permissible deductions from wages (or "wage assignments") under Indiana law. The previously permissible deduction for merchandise sold by the employer to the employee has been modified to allow for deductions for goods and food "offered by the employer and sold to the employee, for the employee’s benefit, use or consumption." This will allow employers to deduct from wages for food sold in a cafeteria or vending area, even if the food or vending machines are not available to customers of the employer, and for other goods that the employer might make available to the employee.  Keep in mind that the employee must still request the purchase in writing and sign an assignment that complies with the statute's requirements. Specifically, the assignment must be in writing, signed by the employee, revocable at any time and signed by the employer within 10 days. The employee must receive a fully executed copy of the wage assignment.

Three additional, permissible deductions were also added to the statute's list, increasing the number of permissible deductions to 16. The three added deductions are for:

  • The purchase of uniforms and equipment necessary to fulfill the duties of employment.
    • The total amount of wages assigned [under this permissible deduction] may not exceed the lesser of:
      • two thousand five hundred dollars ($2,500) per year; or
      • five percent (5%) of the employee’s weekly disposable earnings
  • ​Reimbursement for education or employee skills training, as long as the education or employee skills training benefits were not provided, in whole or in part, through an economic development incentive from any federal, state or local program.
  • An advance for payroll or vacation pay. 

These new, permissible deductions are a welcome addition to the list, as many employers struggled with how to address these types of situations – particularly the advance of wages or vacation – without technically violating Indiana law. Again, remember that these deductions are only permitted with a compliant, written assignment authorization signed by the employee. Also, do not overlook federal minimum wage/prevailing wage laws when making these deductions. For example, if an employee is entitled to minimum or prevailing wage, a deduction for required uniforms or equipment that takes the employee's earnings below the required wage can cause problems under the federal law.