State snapshot

Key considerations

Which issues would you most highlight to someone new to your state?

Indiana is generally an employer-friendly state. It adheres strongly to the “employment-at-will” doctrine and has relatively few state-specific employment laws. However, there are unique state law issues that relate to wage deductions and they are frequently the basis of litigation.

What do you consider unique to those doing business in your state?

Some cities and counties across the country, including Indianapolis, have enacted local ordinances restricting an employers’ ability to inquire into the criminal histories of applicants during various stages of the job application process. These ordinances are commonly known as “ban-the-box” legislation. However, in 2017 Indiana became the first state to pass legislation prohibiting local governments from adopting such ordinances. Senate Bill 312 prohibits Indiana political subdivisions (including counties, municipalities, and townships) from enacting ordinances that interfere with an employer’s ability to obtain or use criminal history information during the hiring process to the extent allowed by state or federal law. Sponsors of the bill indicated that the purpose of the legislation was to make it easier for employers with state-wide operations to avoid a patchwork of different hiring processes and obligations.

Indiana has taken a decidedly different approach to state government job applicants. In 2017 Indiana became the 27th state to ban the box asking questions about prior arrests or criminal history with respect to applicants for employment within the state government. Governor Holcomb issued an executive order delaying any questions about state government applicants' criminal history until the job interview section of the hiring process. The executive order affects more than 1.12 million Hoosiers with some form of a criminal record, according to data from the U.S. Department of Justice.

Indiana has a strict law regarding wage deductions and, in the Indianapolis area, a very aggressive plaintiffs’ bar that initiates many lawsuits against employers which do not comply with the requirements of the law. 

Indiana also has a blacklisting law that makes it a Class C infraction for an employer which, after having discharged an employee, engages in conduct that prevents the employee from obtaining new employment with any other employer. The employer is also liable for penal damages to the discharged employee. The law does not prohibit an employer from informing, in writing, any other person to whom the discharged employee has applied for employment, of the truthful reasons for the discharge.

A prospective employer must, on written request from a prospective employee, provide copies of any written communications from a current or former employer that may affect the employee’s possibility of employment with the prospective employer. The written request must be received within 30 days after the application for employment has been made.

In addition, when an employee resigns or is terminated, the employer, on written request from the former employee, must issue the employee a signed letter stating whether he or she quit or was involuntarily discharged. This statute does not apply to an employer that does not require written recommendations or written applications.

Indiana has its own state occupational safety agency, the Indiana Occupational Safety and Health Administration.

Under Indiana law, a person that suffers a pecuniary loss as a result of a violation of criminal statutes (e.g., theft or conversion), may bring a civil action against the person who causes the loss for treble damages and reasonable attorney fees. This statute may be used to collect damages from employees who steal from their employers or fail to return company property.

Is there any general advice you would give in the labor/employment area?

Unlike many other states, if employment actions are well documented, summary judgment is often available in federal court.

Emerging issues

What are the emerging trends in employment law in your state, including the interplay with other areas of law, such as firearms legislation, legalization of marijuana and privacy?

Indiana has recently adopted laws protecting the right of employees to have firearms in their vehicles while parked in company parking lots. The law also prohibits employers from discriminating against employees or applicants for employment based on gun ownership. 

Indiana has also adopted legislation allowing certain criminal convictions to be expunged and prohibiting employers from inquiring into such expunged convictions.

In 2015 the Indiana legislature repealed the state’s prevailing wage law, allowing government contractors more flexibility in the wages paid to employees on government construction projects.

In 2016 the Indiana legislature passed a law providing that, for purposes of the Indiana state law regulating franchises, a franchisor is not considered to be an employer or co-employer of a franchisee or an employee of a franchisee, unless the franchisor agrees in writing to assume the role of an employer or co-employer.

Proposals for reform

Are there any noteworthy proposals for reform in your state?

There were a number of employee-friendly legislative proposals in the 2018 session of the Indiana General Assembly (which ended in March 2018), including:

  • fair pay in employment (a bipartisan bill that would make it unlawful to pay wages that discriminate based on sex, race, or national origin for the same or equivalent jobs) – SB 93;
  • paid employee leave (a bipartisan bill urging the legislative council to study paid personal leave from employment) – SB 113;
  • banning the requirement of an implantable device as a condition of employment (Republican sponsored) – HB 1026;
  • various proposals to increase the minimum wage (Democrat sponsored) – SB 121 and 308;
  • prohibiting discrimination against employees who have filed a protective order (Democrat sponsored) – SB 114; and
  • in the absence of federal law to the contrary, precluding the screening for tetrahydrocannabinol as a condition of an offer of employment (Democrat sponsored) – HB 1177.

None of these bills gained the required support in the General Assembly required for Holcomb’s signature. Republicans hold supermajorities in both chambers of the General Assembly and control the executive branch. Therefore, any employment-related legislation proposed in the 2019 session will require substantial Republican support.

Employment relationship

State-specific laws

What state-specific laws govern the employment relationship?

Indiana has adopted the employment-at-will doctrine. Where there is no definite or ascertainable term of employment, the employment is at-will, and is presumptively terminable at any time, with or without cause, by either the employee or employer. Indiana courts have recognized three narrowly-construed public policy exceptions to the employment-at-will doctrine, which prohibit Indiana employers from terminating an employee for:

  • compliance with jury duty;
  • filing or threatening to file a worker’s compensation claim; or
  • refusing to perform an illegal act.

Indiana’s statutory laws governing the employment relationship can be found in Title 22 (Labor and Safety) of the Indiana Code.

Who do these cover, including categories of workers?

Indiana’s employment-at-will doctrine applies to all employers and employees, unless otherwise provided by contract or statute.

Indiana employment laws cover employees only (with different thresholds for the required number of employees), not independent contractors – for example:

  • the Worker’s Compensation Law applies to every employer-employee relationship in Indiana, unless specifically exempted;
  • the Minimum Wage Law applies to employers with two or more employees; and
  • the Civil Rights Law applies to any employer employing six or more employees within the state.

Misclassification

Are there state-specific rules regarding employee/contractor misclassification?

Yes. Indiana’s state agencies rely on different tests to determine the proper classification of employees and independent contractors.

For the purposes of eligibility for unemployment insurance, the Indiana Department of Workforce Development will consider a worker an independent contractor only if all of the following apply:

  • the individual is free from control and direction in connection with the performance of their service;
  • the service is performed outside the company’s usual course of business, and the individual’s usual area of employment is not within the company’s business; and
  • the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the work that he or she does for the company or is a sales agent who is paid commission only and has complete control over his or her own time and effort. 

For purposes of eligibility for worker’s compensation, the Indiana Worker’s Compensation Board defers to the Internal Revenue Department (IRS) guidelines for the definition of “independent contractor”. Indiana’s workers’ compensation law generally excludes certain workers from the definition of the term “employee,” including real estate professionals, owner-operators that provide a motor vehicle and the services of a driver.

For purposes of state taxes, the Indiana Department of Labor evaluates the same factors as the IRS in making worker classification determinations.

For third-party liability, Indiana has adopted the 10-factor common law test, found at the Restatement (Second) of Agency § 220(2), to determine whether an individual is acting as an employee or an independent contractor. All factors are considered and no single factor is dispositive.

Contracts

Must an employment contract be in writing?

Generally, Indiana employment contracts need not be in writing. However, employment contracts that extend for a term of one year or more must be in writing and signed by the party to be charged. It is highly recommended that employment agreements be in writing.

Are any terms implied into employment contracts?

Indiana courts may imply two terms in employment contracts. First, Indiana courts imply that employment contracts for an indefinite period of time are “at will”—meaning that either the employer or employee may terminate the employment contract at any time and for any reason. Second, Indiana courts also imply a covenant of good faith and fair dealing in employment contracts.

However, Indiana courts do not imply a covenant of good faith and fair dealing to at-will employment relationships.

Are mandatory arbitration agreements enforceable?

Indiana courts will enforce mandatory arbitration agreements. However, the courts will enforce only mandatory arbitration agreements as to those issues that the parties have agreed to arbitrate by clear and express language. Courts will not extend mandatory arbitration agreements by construction or implication.

How can employers make changes to existing employment agreements?

Basic contract principles and the terms of the employment agreement govern modifications of employment agreements. Continued employment is generally sufficient consideration for modification of at-will employment relationships. 

Hiring

Advertising

What are the requirements relating to advertising open positions?

None.

Background checks

What can employers do with regard to background checks and inquiries?

(a) Criminal records and arrests

Non-criminal justice agencies and individuals may request a limited criminal history (including arrests) of an applicant for employment. 

A non-criminal justice organization or individual that receives a limited criminal history may not use it for purposes other than those stated in the request, or that deny any civil right to which the subject is entitled.

Employers are prohibited from asking an employee, contract employee, or applicant whether the person's criminal records have been sealed or restricted. An employer which violates this subsection commits a Class B infraction. 

Any person who knowingly or intentionally uses limited criminal history for any purpose not authorized by statute commits a Class A misdemeanor.

(b) Medical history

Indiana has no specific statute restricting inquiries into medical history in the employment setting. Private employers can generally test job applicants and employees for drugs, alcohol, and other controlled substances in accordance with the requirements of the Americans with Disabilities Act and the Indiana Civil Rights Act.

(c) Drug screening

Indiana has no specific statute restricting drug tests. Private employers can generally test job applicants and employees for drugs, alcohol, and other controlled substances in accordance with the requirements of the Americans with Disabilities Act and the Indiana Civil Rights Act. 

(d) Credit checks

Indiana has no specific statute restricting credit checks in the employment setting. Private employers can generally perform credit checks on employees and applicants in accordance with the requirements of federal law, such as the Fair Credit Reporting Act and Title VII.

(e) Immigration status

Indiana has no statute regarding immigration status that is generally applicable to private sector employers. However, all Indiana agencies and political subdivisions are required to use the federal E-Verify program to check the work eligibility status of all employees hired after June 30 2011.

After June 30 2015 a public agency cannot enter into or renew a contract for a public works project with a contractor unless:

  • the contract contains a provision:
    • requiring the contractor to enroll in and verify the work eligibility status of all newly hired employees of the contractor through the E-Verify program; or
    • that provides that a contractor is not required to verify the work eligibility status of all newly hired employees of the contractor through the E-Verify program if the program no longer exists; and
  • the contractor signs an affidavit affirming that the contractor does not knowingly employ an unauthorized alien.

If a contractor uses a subcontractor to provide services for work, the contractor is performing under a public contract for services or a contract for a public works project. At the time of certification, the subcontractor must certify to the contractor in a manner consistent with federal law, that the subcontractor:

  • does not knowingly employ or contract with an unauthorized alien; and
  • has enrolled and is participating in the E-Verify program.

(f) Social media

Indiana has no state laws protecting social media passwords in the employment context.

(g) Other

An employer doing business in Indiana cannot:

  • require an applicant for employment or an employee to disclose information about whether the applicant or employee owns, possesses, uses, or transports a firearm or ammunition, unless the disclosure concerns the possession, use, or transportation of a firearm or ammunition that is used in fulfilling the duties of the employment of the individual; or
  • condition employment, or any rights, benefits, privileges, or opportunities offered by the employment, on an agreement that the applicant for employment or the employee forego:
    • the rights of the applicant or employee; or
    • the otherwise lawful ownership, possession, storage, transportation, or use, of a firearm or ammunition. 

Employers may not require, as a condition of employment, that an employee or prospective employee refrain from using tobacco products outside the course of employment.

Wage and hour

Pay

What are the main sources of wage and hour laws in your state?

Indiana has two primary sources for wage and hour laws:

  • the Wage Payment statute, which governs claims by current employees or those employees who have voluntarily left employment (Ind. Code Ann. § 22-2-5-1); and
  • the Wage Claims Statute, which governs claims by employees who have been involuntarily separated or are out of work as a result of a labor dispute (Ind. Code Ann. § 22-2-9-2).

Indiana also has a minimum wage and overtime statute that tracks the requirements of the Fair Labor Standards Act (FLSA). Indiana employers covered by the FLSA are not covered by Indiana’s minimum wage and overtime statutes.

What is the minimum hourly wage?

Indiana’s minimum hourly wage is $7.25. This wage applies to employers having two or more employees in any workweek. Indiana’s minimum hourly wage is the same as the federal minimum hourly wage, and Indiana’s wage increases automatically with the federal wage.

Indiana units of local government are prohibited from enacting ordinances requiring a minimum wage in excess of the state or federal minimum wage (I.C. 22-2-2-10.5).

What are the rules applicable to final pay and deductions from wages?

Indiana’s final-pay rules Indiana employers must pay terminated employees their final wages at the time of separation or no later than their next regularly scheduled payday. This rule does not apply to railroad employees.

Indiana employers must pay employees who voluntarily quit their final wages at the time of separation or no later than their next regularly scheduled payday. If an employee quits and does not provide the employer with their future whereabouts, the employer is not subject to a penalty until either:

  • 10 business days have elapsed after the employee has made a demand for wages; or
  • the employee has furnished the employer with the employee’s address where the wages may be sent or forwarded. 

The following are exempt from Indiana’s final pay rules:

  • salaried employees eligible for overtime compensation;
  • farmers and those engaged in agriculture and horticulture business; and
  • criminal offenders in a facility operated by the Department of Correction.

Indiana’s wage-deduction rules Indiana employers may not fine an employee and deduct the amount from the employee’s wages. However, employers may deduct the amount of an overpayment from an employee’s paycheck, provided that the following conditions are met:

  • the employer gives the employee two weeks’ notice before making the deduction;
  • the amount of the deduction does not exceed the lesser of 25% of the employee’s disposable earnings for that week or the amount by which the employee’s disposable earnings for that week exceed 30 times the federal minimum hourly wages in effect at the time the earnings are payable.

Indiana employers may deduct additional amounts from an employee’s paycheck when the following three conditions are satisfied:

  • the agreement for the deduction is in writing, signed by the employee, by its terms revocable at any time by the employee on written notice, and agreed to in writing by the employer;
  • a copy of the deduction agreement is delivered to the employer within 10 days of its execution; and
  • the deduction falls in one of the following approved categories:
    • premiums on an insurance policy obtained for the employee by the employer;
    • contributions to a charitable organization;
    • purchase price of bonds, securities, or stock of the employing company;
    • labor union dues;
    • purchase price of merchandise sold by the employer to the employee;
    • amount of loan made to the employee by the employer;
    • employee contributions to a hospital service or medical expense plan;
    • payment to an employee’s direct deposit account;
    • uniform or equipment purchase, rental, or use necessary to fulfill the duties of employment;
    • reimbursement for education or employee skills training;
    • an advance for payroll or vacation pay; or
    • merchandise, goods, or food offered by the employer, for the employee’s benefit, at the written request of the employee. 

Hours and overtime

What are the requirements for meal and rest breaks?

Indiana has no requirements for rest breaks, meal breaks, or other breaks for adult employees. However, minor employees who work six or more hours in a shift must be given one or two breaks totalling at least 30 minutes.

Other categories of workers who may be entitled to breaks include:

  • public employees;
  • contract-carrier drivers; and
  • nursing mothers.

What are the maximum hour rules?

Generally, Indiana has no maximum-hour rules governing employment. However, it does have specific maximum-hour laws governing:

  • contract-carrier drivers transporting railroad employees (Ind. Code Ann. § 8-9-11-3);
  • the employment of children (Ind. Code Ann. § 20-33-3-22 to 29); and
  • public utility employees (Ind. Code Ann. § 8-1-8.3-6).

How should overtime be calculated?

Overtime should be calculated by multiplying an employee’s “compensatory time” by the product of a rate not less one-and-a-half times the employee’s “regular rate.” “Compensatory time” means the number of hours an employee work in excess of 40 hours. “Regular rate” means the rate at which an employee is employed and includes “all remuneration for employment paid to, or on behalf of, the employer.”

An employee’s “regular rate” does not include:

  • sums paid as gifts or rewards;
  • payments made for vacation, holiday, illness, or other similar cause, other reimbursable payments, and other payments which are not made as compensation for an employee’s hours of employment;
  • sums paid in recognition of services performed, including end-of-contract bonuses, payments for a good-faith share plan, or talent fees;
  • contributions made to old age, retirement, life, accident, or health insurance plans;
  • extra compensation for working longer than an eight-hour day;
  • extra compensation for working on Saturdays, Sundays, and holidays; or
  • any other extra compensation for working outside of established hours.

What exemptions are there from overtime?

The following are exempt from the Indiana Minimum Wage Law overtime requirement:

  • under 16s;
  • independent contractors;
  • individuals performing services not in the course of the employer’s trade or business;
  • individuals employed on a commission basis;
  • individuals employed by their own parent, spouse, or child;
  • individuals performing services for a religious order or volunteers for a religious or charitable organization;
  • student nurses or students apprenticing as funeral directors or embalmers;
  • interns or resident physicians at duly accredited hospitals;
  • students performing services for any school, college, or university in which they are enrolled and are regularly attending classes;
  • individuals who are physically or mentally disabled and performing services for certain non-profit organizations;
  • insurance producers, insurance solicitors, and outside salesman, who are compensated solely by commission;
  • individuals performing services for camping, recreational, or guidance facilities operated by a charitable, religious, or education non-profit;
  • individuals engaged in certain agricultural labor;
  • individuals employed in executive, administrative, or professional occupations, with the authority to employ or discharge, and who earn $150 or more a week;
  • individuals not employed for more than four weeks in any four consecutive three-month periods; and
  • individuals covered under the federal Motor Carrier Act 1935. 

Record keeping

What payroll and payment records must be maintained?

Indiana employers must furnish each employee a statement of the following:

  • hours worked by the employee;
  • the wages paid to the employee; and
  • a listing of deductions made.

An employer’s wage records must be open to inspection by the commissioner of labor at any reasonable time. An employer that fails to keep payroll and payment records will be subject to penalties.

Discrimination, harassment and family leave

What is the state law in relation to:

Protected categories

(a) Age?

The Indiana Civil Rights Law covers employers with six or more employees (except certain non-profit fraternal, religious, or social organizations) and prohibits employers from terminating or refusing to hire a person because of his or her age if the individual is between 40 and 75 years old.

Unlike other violations under the Civil Rights Law, complaints and investigations of age discrimination fall under the purview of the Department of Labor (Ind. Code Ann. § 22-9-2-1 and following), not the Indiana Civil Rights Commission. In practice, if age discrimination claims are brought, they are generally brought exclusively under the Federal Age Discrimination in Employment Act. Federal Age Discrimination in Employment Act charges must be brought before the Equal Employment Opportunity Commission within 180 days of the alleged discriminatory act.

(b) Race?

The Indiana Civil Rights Law covers employers with six or more employees (except certain non-profit fraternal, religious, or social organizations) and prohibits discrimination on the basis of race, color, national origin, and ancestry.

(c) Disability?

The Indiana Civil Rights Law covers employers with six or more employees (except certain non-profit fraternal, religious, or social organizations) and prohibits discrimination on the basis of disability. However, this law does not require an employer to modify any physical accommodations or administrative procedures to accommodate a person with a disability.

(d) Gender?

The Indiana Civil Rights Law covers employers with six or more employees (except certain non-profit fraternal, religious, or social organizations) and prohibits discrimination on the basis of gender.

(e) Sexual orientation?

Indiana has no state law prohibiting sexual orientation discrimination in employment. However, several Indiana cities and counties have local ordinances prohibiting discrimination based on sexual orientation and/or gender identity, including:

  • Bloomington and Monroe County (both);
  • Carmel (both);
  • Columbus (both)
  • Evansville (both);
  • Hammond (both);
  • Kokomo (both);
  • Lafayette and Tippecanoe County (sexual orientation);
  • Michigan City (sexual orientation);
  • Muncie (both);
  • New Albany (both);
  • West Lafayette (both, by resolution only);
  • Fort Wayne (sexual orientation);
  • Indianapolis (both);
  • South Bend (both); and
  • Whitestown (sexual orientation).

(f) Religion?

The Indiana Civil Rights Law covers employers with six or more employees (except certain non-profit fraternal, religious, or social organizations) and prohibits discrimination on the basis of religion.

(g) Medical?

See above.

(h) Other?

Indiana law prohibits employment discrimination based on the use of tobacco products off the job, as well as discrimination based on gun ownership.

Harassment

What is the state law in relation to harassment?

State law generally follows Title VII and other federal laws prohibiting harassment based on protected status.

Family and medical leave

What is the state law in relation to family and medical leave?

While Indiana has no general law dealing with family and medical leave, the state has enacted a bone marrow/organ donation leave law for state employees (Indiana Code, Title 4, Article 15, Chapter 16). The state has also enacted the Military Family Leave law (P.L. 151 (H. 1092), L. 2007).

Military leave Indiana employers with 50 or more employees are required to allow an eligible employee who is the spouse, parent, grandparent, or sibling of an individual on active military duty up to 10 unpaid working days of leave per year to spend time with the relative who is serving in the U.S. armed forces or Indiana National Guard. The period of active duty must exceed 89 consecutive calendar days. The leave can be taken at one time or intermittently throughout the year. The leave may be taken during the 30 days before deployment, when the individual on active duty returns home on authorized leave, or after the service person returns home (Ind. Code Ann. § 22-2-13).

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

Indiana’s employees have limited rights with regard to privacy and monitoring in the workplace.

The Indiana Wiretap Act protects employees by prohibiting employers from intercepting, disclosing, or using employees’ computer or telephone communications without the consent of at least one party to such communications.

Indiana employees may also sue employers for invasion of privacy under the theories of intrusion on seclusion, public disclosure of private facts, “false light,” and misappropriation of name and likeness. However, invasion-of-privacy torts in the employment context have been construed narrowly.

Are there state rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

Indiana has no state laws protecting social media passwords in the employment context. Nor does Indiana have state laws on employer monitoring of employee social media accounts.

Bring your own device

What is the latest position in relation to bring your own device?

Indiana has no state specific laws governing bring your own device.

Off-duty

To what extent can employers regulate off-duty conduct?

Most Indiana employers may not discriminate against employees who use tobacco products outside of the course of the employee’s employment. Additionally, employers cannot require employees to refrain from using tobacco products as an employment condition. However, Indiana employers may use financial incentives to reduce their employees’ tobacco use. The state statute governing the regulation of employee’s off-duty tobacco use does not apply to churches, religious organizations, or schools or businesses conducted by churches or religious organizations.

Indiana employers may not terminate employees who petition courts for protective orders. However, this prohibition does not prevent employers from changing the employee’s place of employment, compensation and benefits, or another term of employment.

Indiana employers may not condition employees’ or applicants’ employment on employees or applicants giving up any rights they have as gun owners.

Gun rights

Are there state rules protecting gun rights in the employment context?

Yes. Generally, Indiana employers may regulate an employee’s possession of a gun during and in the course of the employee’s duties or while the employee is on the employer’s property. However, this general rule has three important exceptions.

First, Indiana employers cannot adopt a policy or rule that prohibits—or has the effect of prohibiting—an employee from possessing a gun that is either:

  • locked in the trunk of an employee’s vehicle;
  • kept in the glove compartment; or
  • placed out of sight in the employee’s locked vehicle in the employer’s parking lot.

This exception applies to all employers except schools, group homes, domestic-violence centers, certain public utilities, and employers licensed by the U.S. Nuclear Regulatory Commission or subject to the U.S. Department of Homeland Security’s Chemical Facility Anti-Terrorism Standards.

Second, Indiana employers cannot ask employees or applicants to divulge information about their ownership, use, possession, or transportation of guns. But employers can ask employees and applicants about their possession, use, or transportation of guns if the guns are used in fulfilling the employee’s or applicant’s duties.

Third, Indiana employers cannot condition employees’ or applicants’ employment on employees or applicants giving up any rights they have as gun owners. 

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

Generally, in the absence of an express or implied agreement as to the ownership of an employee's inventions, the employer—from the mere fact of general employment—has no exclusive rights to such inventions. This rule is especially true where none of the employer's material or labor enters into the discovery or perfection of the invention, and nothing belonging to the employer is devoted to the construction of the invention until after it has been put into definite form, carried to completion, and a patent either issued or applied for.

Restrictive covenants

What types of restrictive covenants are recognized and enforceable?

A covenant not to compete is enforceable if an employer is protecting a legitimate business interest, such as trade secrets, confidential information, or good will generated between a customer and a business. Covenants not to compete are generally disfavored as being in restraint of trade, but will be enforced if the restraint is reasonably necessary to protect the employer's business, is not unreasonably restrictive of the employee, and is not against public policy. 

Courts take into account the geographic and temporal restrictions imposed in determining whether restrictive covenants are enforceable. 

In some instances, Indiana courts may modify overbroad non-compete agreements to make them enforceable by excluding severable words or terms, but they will not re-write or add words in order to make an agreement enforceable.

Indiana courts also recognize a duty of loyalty owed by an employee to an employer during the employment relationship. This duty of loyalty prohibits an employee from soliciting the employer’s customers, accounts or employee for the benefit of the employee personally or any third party. 

In addition, the corporate opportunity doctrine, which is derived from the duty of loyalty, bars a former employee from competing with his or her former employer for a prospective customer if the employee knows, by virtue of his or her former employment, that the deal is in process.

Non-compete

Are there any special rules on non-competes for particular classes of employee?

There are no statutes providing special rules for non-competes for specific types of employees. However, Indiana has extensive case law defining what classes of employee courts are most likely to enforce non-competes against.

Labor relations

Right to work

Is the state a “right to work” state?

Indiana is a “right to work” state. An employee may not be required to pay union dues, fees, or assessments as a condition of employment. However, some employees are exempt from this law—including employees of the United States, employees of the State of Indiana and any of its political subdivisions, and employees covered by the Railway Labor Act. The Indiana Right-to-Work Law applies to contracts entered into, modified, renewed, or extended after March 14 2012.

Unions and layoffs

Is the state (or a particular area) known to be heavily unionized?

Indiana is not known to be heavily unionized. In 2014 union members accounted for 10.7% of Indiana’s wage and salary workers, compared to the national average of 11.1%.

What rules apply to layoffs? Are there particular rules for plant closures/mass layoffs?

Indiana has no state-specific laws regarding mass layoffs or plant closures.

Discipline and termination

State procedures

Are there state-specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

None for private sector employers.

At-will or notice

At-will status and/or notice period?

If a contract for employment contains no definite or ascertainable term of employment, then the employment is at-will, and is presumptively terminable at any time, with or without cause, by either party, or by mutual agreement.

Employment is strongly presumed to be at-will, and Indiana courts have not been inclined to adopt exceptions to the employment-at-will doctrine. For instance, general expressions of public policy in statutes do not support new exceptions to the employment-at-will doctrine. In addition, Indiana courts have declined to recognize an implied covenant of good faith and fair dealing in the at-will employment context.

What restrictions apply to the above?

Indiana courts have recognized three general exceptions to the employment-at-will doctrine:

  • instances in which there is adequate independent consideration to support an employment contract—for example, if an employee leaves a job with assured permanency and accepts a new job based on promises of the same permanency;
  • a public policy exception where a clear statutory expression of a right or duty is contravened (to date, Indiana courts have recognized this exception in only a few circumstances)—employers cannot terminate employees for exercising rights under the worker’s compensation statute (known as a “Frampton” claim), for serving on a jury or for refusing to commit an illegal act; and
  • instances in which the employer made a promise to the employee and the employee relied on the promise to his or her detriment (i.e., promissory estoppel).

Indiana courts have generally rejected the idea of a handbook as an enforceable employment contract.

Final paychecks

Are there state-specific rules on when final paychecks are due after termination?

Indiana employers must pay terminated employees their final wages at the time of separation or no later than their next regularly scheduled payday. This rule does not apply to railroad employees.