Employment relationship

State-specific laws

What state-specific laws govern the employment relationship?

The primary statutes relating to employment are:

  • the Iowa Civil Rights Act (ICRA);
  • the Iowa Wage Payment Collection Act;
  • the Iowa Employment Security Law;
  • the Iowa Drug Testing Statute;
  • the Public Employment Relations Act;
  • the Iowa Occupational Safety and Health Act;
  • the Iowa Worker Adjustment and Retraining Notification Act; and
  • the Iowa Workers’ Compensation Act.

 

Most of these statutes are accompanied by a number of regulations. In addition, numerous federal statutes and regulations govern the Iowa workplace.

Who do these cover, including categories of workers?

The ICRA covers all private and public sector employers who employ four or more individuals. The Iowa Wage Payment Collection Act applies to both private and public sector employees, and includes limited exemptions for certain categories of agricultural workers. The Iowa Public Employment Relations Act applies only to public employees. The Iowa Drug Testing Statute applies only to private sector employers. The Iowa WARN Act applies to both private and public sector employers who employ 25 or more persons, excluding part-time employees.

Misclassification

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

No. Classification of workers as employees or contractors is an issue of federal law. The seminal case in Iowa for distinguishing between an independent contractor and an employee is Ernster v. Luxco, Inc. (8th Cir. 2010), in which the court stated:

 

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional  projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Contracts

Must an employment contract be in writing?

Written contracts of employment are not required. Iowa follows the at-will employment doctrine (Dorshkind v. Oak Park Place of Dubuque II, LLC, 2011). Unless an employee has a valid contract of employment that provides otherwise, "the employment relationship is terminable by either party 'at any time, for any reason, or no reason at all'."

In Iowa, employee handbooks and written personnel policies may be considered part of an employment agreement. Under Iowa law, these employment documents can amount to a unilateral contract that can limit an employer's right to terminate an otherwise at-will employee only for cause or only under certain conditions (such as completion of all the specified steps in a progressive discipline policy). However, the Iowa Supreme Court has also approved the use of disclaimers in employment handbooks. As such, a disclaimer can prevent the formation of a contract by clarifying the intent of the employer not to make an offer in distributing the handbook.

In at least one case, the Supreme Court has held that the doctrine of promissory estoppel is also applicable as an exception to at-will employment. The difference between a promissory estoppel theory and unilateral contract theory is that in the former, detrimental reliance substitutes for the consideration present under a unilateral contract.  

Are any terms implied into employment contracts?

Written employment contracts have implied in them a covenant of good faith and fair dealing, which is implied in all written contracts in Iowa. However, an at-will employment relationship has no such implied covenant.

Are mandatory arbitration agreements enforceable?

Iowa Code section 679A.1(2)(b) invalidates pre-dispute arbitration agreements between employers and employees. Due to U.S. Supreme Court decisions interpreting the scope of the Federal Arbitration Act (FAA), however, arbitration agreements that govern employment relationships and employment claims are enforceable in Iowa. However, a civil rights agency in Iowa may exercise its enforcement power with respect to a claim falling under the Iowa Civil Rights Act (ICRA), even if the claim is subject to an arbitration provision. This follows the federal Waffle House standard. Under 2022 amendments to the FAA, pre-dispute arbitration agreements and pre-dispute class or collective action waiver agreements in regard to claims alleging sexual assault or sexual harassment are unenforceable at the election of the claimant. Accordingly, this election would apply to such claims in Iowa. 

How can employers make changes to existing employment agreements?

In the context of written employment agreements, employers rarely can make unilateral changes during the term of the contract; most contracts provide for amendment by mutual agreement. In at-will employment relationships (no contract), changes can be made unilaterally, provided the changes are not discriminatory or violate public policy. Employers and employees subject to collective bargaining agreements are limited as to when changes in the collective bargaining agreement may be negotiated and have certain bargaining obligations over such changes.