What is at-will employment?
At will employment means that an employee can be terminated by the employer for any reason, except a bad one. At will employment means that an employer can fire an employee for any lawful reason without warning and without fear of legal action. However, this definition does not apply in every state. When joined by other statutes, the basic at-will doctrine has become subject to interpretation by courts across the nation.
Most states of the 50 states have adopted the doctrine of employment at will. For most states, unless the employee has a contract for employment, he or she is considered an employee at will. Further, unless there is a contract for employment or a union contract, either the employee or employer may terminate the relationship at any time and for any legal reason. Most states recognize the right of an employer to terminate employment at will.
Indiana is an employment at will state. In Indiana employers have more rights than employees. In Indiana you can lose your job at any time, and at any moment, and for any little reason, unless it is a bad reason. This is known as the public policy exception . The courts in Indiana recognize three policy reasons under public policy; 1) an employee will not be discharged for refusing to commit an illegal act or for reporting an employer’s illegal activity to authorities, or 2) an employee will not be discharged solely for seeking to secure or take advantage of a right or privilege that is protected by statute, or 3) an employee will not be discharged or discriminated against for exercising an employment-related right that is guaranteed by statute. These rules are few and far between, however, in Indiana, the power is with the employer.
In looking at the United States, as of the late 1990’s, more than half the states have passed some type of "at will" statute or employment law. However, in many states there are also exceptions to the rules on at will employment. For example, some states have exceptions based upon general employment policies, or human resource policies; some states have exceptions based upon public employment (i.e. police officers); some states exempt employers from liability for claims involving wrongful discharge, etc.; while in most states, the courts strictly interpret the at will employment concept.
At-will employment law in Indiana
The most fundamental of the Indiana employment-at-will exceptions is an implied contract of employment. It is implied from the conduct of the parties and their intention as evidenced by their conduct. In particular, the Indiana Supreme Court has held that an employer who gives an employee an oral or written job description that contains terms or conditions of employment "has in effect made a contract and cannot, without notice, unilaterally disregard its terms."
In Indiana, certain public policies are recognized by statute and case law as exceptions to the at-will doctrine. Under Indiana law, those public policies are:
Indiana law also recognizes other situations in which individuals have a property interest or expectancy in their employment that could limit an employer’s ability to terminate their employment. In this regard, the Legislature in 2009 passed a law that requires a public agency to provide notice prior to termination or demotion for professional employees. A "professional employee" is defined as "an individual who is employed in a professional position, with or without a license or license waiver, as provided in section 2 of this chapter." The definition of "professional position" is a position working for a public agency in a specialized field, such as those requiring technical, scientific, artistic, or educational skill or knowledge.
A public employee’s expectancy of continued employment can also be established under a collective bargaining agreement, an employment contract, or the employer’s personnel policy. These situations, however, do not create an implied contractual exception because it is limited to a specific employee rather than a public policy.
Alternatives to at-will employment in Indiana
Although the at-will doctrine is the general law on the employment status of Indiana employees, exceptions to the doctrine have been recognized. First, there are narrow public-policy exceptions to the at-will employment doctrine. It has been observed that: "Public policy is a vague concept and is difficult to define, but it has been observed that ‘[p]urely voluntary adoption by the employer of the usual employment practices creates no vested right to them. No employee has the right not to be discharged contrary to the interest of the public as well as that of the employer.’" (Citation omitted.) For example, the Indiana Supreme Court has stated that "an employer may not terminate an employee when the termination would constitute a wrongful denial of [the employee’s] right to an unemployment compensation benefit." L .A. Lubes, Inc. v. Cortes, 778 N.E.2d 826, 831 (Ind. 2002). Further, although an employer may fire an employee based on the employee’s inability to meet nondiscriminatory performance-based expectations, an employee may bring a wrongful discharge claim if their firing "violates a clear mandate of public policy articulated in a statute." Alderman, 910 N.E.2d at 849. Second, written contracts and contractual agreements (e.g., a collective bargaining agreement) between the employer and employee may also limit or alter the at-will doctrine. Third, the Indiana Wage Claims Statute provides that employers must pay wages, including vacation pay, timely and without condition. Ind. Code § 22-2-5-1; § 22-2-5-2. If an employer fails to do so, upon application by the employee "the court shall enter judgment against the employer for the unpaid amount and for costs and reasonable attorney’s fees." Ind. Code § 22-2-5-4. Such conduct may be the basis of a wrongful discharge claim. See. e.g., Fletcher v. Central Renal & Dialysis Center, Inc., 834 N.E.2d 1072, 1077-78 (Ind. Ct. App. 2005). However, an employee’s recovery under these statutes is not automatic; the employee must establish all statutory prerequisites and the provisions of the statute are strictly construed. For example, a court award of "reasonable attorney fees" does not establish a statutory duty, nor does it expand the meaning of "wages" within the statutory language. Id. at 1078. Lastly, depending on the particular facts, there may also be a basis for a wrongful termination claim under federal law or the law of another state if the employee is subjected to retaliatory discharge, gender discrimination or other such employment actions that violate an established statute.
Employee rights under Indiana law
The at-will employment doctrine, while providing maximum flexibility for employers in Indiana to control the conditions under which their employees work and the conditions under which employment can be terminated, does not limit an employee’s rights under Indiana law. Indiana law, through a patchwork of state and federal statutes and common law theory, guarantees certain rights to employees in their relationships with their employers.
Indiana law prohibits employment discrimination on the basis of protected classes. The Indiana Civil Rights Law prohibits employment discrimination based on race, color, religion, sex, disability, national origin, ancestry, or any other protected class established by federal law applying to employers in Indiana. I.C. 22-9-1(m); I.C. 22-9-1-9(b)(1); I.C. 22-9-2-1. Likewise, Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex, or national origin. 42 U.S.C. § 2000e-2(a). The federal Age Discrimination in Employment Act of 1967 provides anti-discrimination protection to those employees age 40 or older. 29 U.S.C. § 623(a). Other employment laws, such as the Americans with Disabilities Act, provide additional anti-discrimination protections to employees in protected classes.
Indiana law provides employees with the right to be free from sexual harassment in the workplace. Both the Indiana Civil Rights Act and Title VII of the Civil Rights Act of 1964 prohibit sexual harassment in the workplace. Title VII prohibits harassment on account of race, color, religion, gender or national origin. 42 U.S.C. 2000e-2(a)(1). Harassment creates a hostile work environment if: Title VII also prohibits "quid pro quo" sexual harassment: Under these statutes, an employee can file an administrative charge with the Indiana Civil Rights Commission or Equal Employment Opportunity Commission, which may lead to a lawsuit in state or federal court.
Although the employment-at-will doctrine provides maximum flexibility for employers to terminate employment "for cause", Indiana law also includes an implied covenant of good faith between the employee and employer. Even under the employment-at-will doctrine, an employer cannot terminate employment: The Indiana Wage Claims Act provides a remedy for employees whose final paychecks are not paid when required. Under the statute, an employee who is discharged from employment or who quits, and is owed wages at the time employment ends, is entitled to receive those wages: Employers must make the payment within the timeframes established in the statute, and failure to do so will subject the employer to penalties under the statute.
Employer obligations under Indiana law
Employers in Indiana must comply with federal and state employment laws, even if their employees are at-will. Under these laws, employers have the responsibility to act in good faith and not discriminate against employees based on certain characteristics. This section outlines applicable employer responsibilities:
Fair Employment Practices
An employer who employs six or more persons, and who is not covered by federal labor law, is required to refrain from discriminating against employees regarding the terms and conditions of employment in order to protect employees against discrimination. (Ind. Code Ann. § 22-9-1-2; Ind. Code Ann. § 22-9-1-3)
Workplace Surveillance
Surveillance used in the workplace must be for a legitimate purpose and not intended to harass or intimidate employees. If employers control video monitoring, door locks, audio surveillance, and document or data access, they must anticipate and deal with any risk to employees’ personal safety. (Ind . Code Ann. § 35-46-1-10.5)
FMLA
An employer with 50 or more employees must provide up to 12 weeks of unpaid, job-protected leave in a 12-month period for certain circumstances. Employers must continue providing health care benefits and restore the employee to his or her equivalent position when returning to work. (Ind. Code Ann. § 22-2-14.5-1 et seq.)
Context
Employers can never guarantee employees that they will not be fired. With that said, employers in Indiana may terminate at-will employees for any legal reason that is not contrary to state or federal law. In addition, an at-will employee’s hire date is usually the date of hire. (For example, the hire date for an employee rehired after a break in service is his or her most recent date of hire.) The provisions of the Fair Employment Practices Act, the Work Place Surveillance Act, the FMLA, and any other state or federal laws, may change the employment at-will relationship between the employer and employee.
Navigating and resolving disputes
Employees and employers in Indiana have access to a number of processes to resolve disputes relating to at-will employment. Employees may file for unemployment insurance benefits to try and collect unemployment benefits depending on the reason for termination. The Indiana Department of Workforce Development is charged with administering those benefits and will decide whether wages were paid during a period of unemployment. Employees have the right to seek representation by legal counsel in an unemployment hearing.
Disputes may also be filed with the Indiana Civil Rights Commission. Under state and federal law, it is illegal for an employer to discriminate against an employee based on age, race, color, religion, sex, disability or national origin. Each case is investigated by the Commission and they will decide whether there is sufficient evidence of discrimination to file a complaint against the employer.
Claims can also be filed with the Equal Employment Opportunity Commission, but the EEOC may defer cases that are more properly handled by the Indiana Civil Rights Commission (at the discretion of the EEOC).
If the dispute does not fall within the scope of an unemployment filing or civil rights claim, the employee will most likely have to pursue what is referred to as a claim for wrongful discharge or wrongful termination. A plaintiff must generally prove that the alleged wrongful act of the employer is in conflict with public policy. Public policy, in the most basic terms, refers to the general public good, beyond the employer and employee individual relationship. An employer-employee relationship must exist before a discharge dispute arises, and the termination decision must violate not only the US Constitution or Indiana law, but may also violate the Constitution of the state, an Indiana statute, or an accredited social policy or common law rule. Employers reasonably believe that they have discretion to terminate an employee for any reason as long as the reason is not protected by an anti-discrimination law, meaning that the reason for the termination cannot be due to the employee’s race, color, religion, sex, disability, national origin, age, or sexual orientation.
If the employee believes he has a wrongful discharge claim, the first step is to send a demand letter to the employer outlining how and why it kills their claim. If the employer refuses to change its decision, the next step is to file a lawsuit within two years from the incident. If the court finds in their favor, damages can be awarded, but the damages are typically limited and fairly minimal. Although courts recognize that a person’s job can generally be terminated for whatever reason or none at all, Indiana is one of only 12 states that provides a cause of action for wrongful discharge.
Recent developments and looking ahead
In recent years, the legal landscape surrounding Indiana’s at-will employment doctrine has undergone relatively few changes. While Indiana courts continue to uphold the presumption of at-will employment, they have also recognized certain exceptions to its application. This body of case law emphasizes the importance of clear policies and documentation in the event of employee discharge or adverse employment decision. Moreover, this body of law suggests that those terminating an employee for reasons other than just cause should take particular care to document the reasons for the termination to minimize the risk of future claims by terminated employees. Conversely, Indiana courts have continued to reject policy-based exceptions to Indiana’s at-will doctrine, making such legal changes highly unlikely in the near future.
While the Indiana legislature has not adopted at-will reform legislation, the Indiana Department of Workforce Development has continued its ongoing support for the doctrine by revamping its policies and distributed materials to ensure employers’ policies comport with state law . In addition, the Indiana Commissioner of Labor recently issued an expansive interpretation of the economic hardship exemption to the state’s notice requirement. As amended, the law providing for notice of mass layoffs or plant closures now requires only 60 days’ notice in the event economic hardship "makes it impracticable to provide a reasonable period of notice…without dissolving or shutting down operations."
Although other states are considering significant changes to their at-will employment laws, Indiana appears unlikely to pass similar legislation in the near future. Although the Indiana legislature passed a pay equity law in 2019 to address pay disparities by gender, the law did not address any of the other issues covered by other states’ at-will employment legislation. On the contrary, many of the businesses covered under at-will reform legislation operate out of state, but do significant business and generate revenue within the state where coverage is sought, something Indiana Gov. Eric Holcomb has opposed.