For many years, it has been the case that Indiana is a progressive, pro-employee state when it comes to wages. Employees who were not paid wages on a timely basis were entitled to treble damages and attorney fees. A new law passed in the 2015 General Assembly, House Enrolled Act 1469 means that Indiana is a little less pro-employee. The new law, which is effective July 1, 2015, says that employees may receive double and not treble damages. The law also allows employers to assert a “good faith” defense, and amends the 13 specific items which employers may deduct from an employee’s pay check.
Indiana’s treble damage pay status has always been viewed as an extremely pro-employee statutory scheme. In Steele v. St. Vincent Hospital (Ind. 2002), the impact of this law was fully felt as Dr. Steele and his attorneys recovered over $1 million for a wage claim case under this law. The wise Hoosier employer did not fail to timely pay wages, or to pay wages properly, since the punishment might make the fight foolish.
That is a little less true now as the Indiana Legislature has lightened the punishment by one third. I.C. 22-2-5-2 has been amended to lower the damages: “the failure to pay wages, that the employee be paid an amount equal to two (2) times the amount of wages due to the employee.” House Enrolled Act No. 1469. This will ease the burden somewhat on the unfortunate employer who, for some reason, failed to pay the timely wage.
Another significant change in the law is a “good faith” defense to the failure to pay wages properly. The law now reads:
In addition, if the court in any such suit determines that the …[employer]… that failed to pay the employee … was not acting in good faith, the court shall order as liquidated damages for the failure to pay wages, that the employee be paid an amount equal to two (2) times the amount of wages due to the employee.
Now the Courts will be left to determine “good faith” under this new wage statute. Will good faith include the employer who creates a mind-bendingly difficult commission structure and then is sued by the commissioned salesperson? How about the employer who thinks paying monthly is OK even after being told by an employee that Indiana law requires payment after ten days of work? The courts will be left to sort this out good faith issue and double the amount owed will be in the balance.
The new law also further defines wage assignments. Employers often wrongly believe they may deduct for anything from employees’ paychecks. There are 13 specified payroll deduction items, which now is enlarged to 16. The amended law specifies that the price of goods or food may be deducted from an employee’s pay, as well as the new items of uniforms, advances for education, payroll or vacation pay. Still, wise employers know that a pay deduction must be in writing, signed by the employee and that it is revocable. Thus, the savvy employee could hand the employer a revocation of the payroll deduction and then quit the job and the employer is barred from deducting the agreed upon amounts from the last pay. If the employer makes an illegal deduction, the now double damages and attorney fee provision applies.
Finally, the interest an employer may charge for advances is set at the prime rate plus 4%. Currently, the prime is 3.25% and so the most an employer could charge is 7.25%. Advancing money to employees is not a good idea. A wise employer will have an adamant policy against it.