Indiana Termination Laws

Termination laws in Indiana help to establish a fair balance between the rights of employers and employees. These laws offer protection against wrongful termination for employees and ensure employers comply with federal and state laws.

This article covers the key aspects of Indiana’s termination laws and provides insights into the legal framework governing employment termination.

Legal Considerations for Termination in Indiana

There are a number of legal requirements to consider when terminating an employee in Indiana. These include:

• Anti-Discrimination Laws: Federal laws, such as The Civil Rights Act of 1964, and state-specific laws, such as the Indiana Civil Rights Laws and Regulations, prohibit employers from terminating employees based on race, color, sex, religion, disability, age, gender identity, or sexual orientation. Employees who feel they have been a victim of discrimination can file a complaint with the Indiana Civil Rights Commission (ICRC).
• Protection Against Retaliation: Employees are protected from termination for taking part in legally protected activities such as reporting discrimination, participating in investigations, requesting fair compensation, and filing complaints with government bodies like ICRC.
• Documentation: Employers should document all the reasons leading up to the employment termination, such as employee performance issues and disciplinary actions. Well-maintained documentation can protect employers from legal challenges such as wrongful termination claims.
• Final Pay: Employers are required to issue the final paycheck to terminated employees on or before the upcoming payday. If an employee does not receive their final paycheck on time, they can register a complaint with the U.S. Department of Labor’s Wage and Hour Division.
• Public Policy Exception: Employers cannot fire employees for reasons that conflict with established public policies. For instance, an employee can not be terminated for reporting illegal activities, exercising voting rights, or serving on a jury.
• Employment Benefits: Employers with 20 or more employees have to observe the Consolidated Omnibus Budget Reconciliation Act (COBRA). This act mandates employers to offer terminated employees and their families the option to continue their health coverage.

“At-Will” Employment in Indiana

What is “At-Will” Employment?

At-will employment in Indiana allows both employers and employees to terminate employment at any time, for any reason or no reason at all, as long as the termination does not violate the law or contradict any implied contract. This means that either party can terminate the employment without giving notice or providing a just cause unless there is an implied contract or a legal exception that states otherwise.

What are the Exceptions to “At-Will” Employment in Indiana?

Although Indiana follows the at-will employment doctrine, there are some exceptions that protect employees from wrongful termination. They include:

• Discrimination: Employers cannot terminate employees based on characteristics such as race, religion, sex, gender identity, age, veteran status, or disability. If an employee is fired due to discrimination, the termination can be considered unlawful.
• Public Policy Exceptions: Employers cannot terminate employees for exercising a clear statutory right, fulfilling a legal obligation, or refusing to commit an illegal act. For example, employees are protected from termination if they report illegal activities (whistleblowing) or refuse to engage in illegal actions.
• Retaliation: Employers are prohibited from terminating employees for retaliatory reasons or engaging in protected activities. For instance, employees cannot be fired for raising concerns about illegal practices, reporting discrimination or taking part in voting.
• Contract Breach: Employment contracts are legally binding agreements that outline specific terms and conditions. While at-will employment allows termination for any lawful reason, a signed contract imposes obligations that both parties must meet. If an employer fails to adhere to these terms, including the outlined termination procedures, the employee may sue for breach of contract.

Employment Under Contract in Indiana

In Indiana, employment under contract varies from at-will employment by providing specific guidelines for the employment relationship. Employment contracts state the terms of employment, such as compensation, job responsibilities, employment benefits, and conditions under which termination may occur. A contract can specify reasons for termination, including misconduct or failure to fulfill job responsibilities, and may also detail requirements for prior notice and conditions for receiving severance pay.

Additionally, some contracts include non-compete and non-disclosure agreements, which restrict employees from working for competing companies or sharing confidential information after leaving the company. Non-compete clauses typically define the duration and geographical scope of the restriction, while non-disclosure agreements outline what constitutes confidential information and the employee’s obligations to protect it.

Contracts may also specify whether the employment is for a fixed term or an indefinite duration, with fixed-term contracts outlining a specific end date or conditions for termination and indefinite contracts continuing until terminated by either party under the contract’s terms. Other miscellaneous provisions might cover dispute resolution procedures, intellectual property rights, and conditions for modifying the contract. If an employee is fired for reasons not mentioned in the contract, they may file a case for wrongful termination.

Lawful Termination in Indiana

Legal Grounds for Termination in Indiana

Here are some of the legal reasons which allow employers to terminate employees: 

• Performance Issues: Employers have the right to fire employees based on poor performance and failure to meet the job standards. It is important to document all the occurrences of unsatisfactory performance so employers can justify their decision to terminate an employee.
• Downsizing Workforce: Employment termination may occur due to a workforce reduction, which often results from financial challenges or restructuring within a company. However, employers with 100 or more employees are required to issue a 60-day notice of layoffs or plant closures, as per the Worker Adjustment and Retraining Notification (WARN) Act.
• Misconduct: Employers can terminate employees for gross misconduct, such as felonies, theft, fraud, or working under the influence of drugs or alcohol. If an employee is fired for misconduct, they will not receive any unemployment benefits.
• Policy Violation: When an employee violates a company policy, it provides legal grounds for termination due to this violation. Some examples of violations could be failing to follow workplace rules or sharing confidential information without permission.

To better understand the employment laws and legal considerations, read our guide to firing employees in Indiana for employers.

How Do I File a Wrongful Termination Claim in Indiana?

The first step is to identify valid grounds for your wrongful termination case, such as discrimination or retaliation for participating in protected activities. Gather any supporting evidence, such as employment agreements, termination letters, and communication records with your employer. You can also review your employment contract to examine any particular termination procedures that may have been violated.

For wrongful termination, you can file a claim with the Indiana Civil Rights Commission (ICRC) for state-specific issues or the Equal Employment Opportunity Commission (EEOC) for federal issues. The process of filing a claim can be completed online, by phone, or by fax. If the concern is about discrimination, you are required to submit a claim within 180 days of the incident.

Legal Protections During Termination in Indiana

In Indiana, termination of employment is governed by federal and state laws. Here are some of the laws employers need to follow when terminating employees:

• Title VII of the Civil Rights Act of 1964: Title VII of the Civil Rights Act of 1964 prevents employers from firing employees based on race, sex, color, religion, or national origin. This law affects employers with 15 or more employees, including those in the private sector, educational institutions, and government.
• Age Discrimination in Employment Act (ADEA): The ADEA protects workers who are 40 or older from workplace discrimination. It applies to employers with 20 or more employees, including government entities, private sectors, and labor organizations.
• Americans with Disabilities Act (ADA): The ADA protects qualified individuals with disabilities from employment discrimination. Employers with 15 or more employees are subject to this act. This includes private employers, employment agencies, and state and local government sectors.
• Family and Medical Leave Act (FMLA): The FMLA allows employees to take protected leave for family and medical reasons without fear of termination. This statute is applicable to all employers with 50 or more employees.
• Fair Labor Standards Act (FLSA): The FLSA establishes minimum wage, child labor guidelines, recordkeeping, and overtime compensation for private and public sector employees. Employers are required to follow this law when terminating employees, including paying out the final wages, according to the FLSA.
• Worker Adjustment and Retraining Notification (WARN) Act: The WARN Act requires employers with 100 or more employees to provide a 60-day advance notice for layoffs or plant closings. The purpose of this act is to give workers sufficient time for finding new employment opportunities.
• Indiana Wage Payment Law: Employers are required to issue the final paycheck to the employees by the next scheduled payday, as per the Ind. Code § 22-2-9-2.

Terminated Employee Benefits in Indiana

Employees terminated in Indiana may be eligible for various benefits depending on the reason for their termination and the terms of their employment agreements. Some benefits for terminated employees include:

• Final Paycheck: Indiana labor laws require employers to issue the final paycheck to terminated employees by the next regular payday. This paycheck must include payment for all hours worked, accrued vacation time, and any other owed compensation.
• COBRA and Health Insurance: Employers with 20 or more employees must provide terminated employees and their families the option to continue their health benefits.
• Unemployment Benefits: An employee may be eligible for unemployment benefits if they were terminated through no fault of their own. Employees can file their claim for unemployment benefits through the Indiana Department of Workforce Development (DWD). In instances where an employee was fired for reasons relating to misconduct, such as violating workplace guidelines or theft, they can not receive unemployment benefits.
• Severance Agreement: Severance agreements come into effect when an employee leaves a company, and usually, the employee is offered compensation in exchange for not suing the employer for any claims against them that they might have.

As per the agreed terms of the severance agreement, the employee is allowed to collect severance pay after termination. In Indiana, severance agreements are not mandated by state law. However, severance pay can be offered through employment contracts or as part of company policy. Employers should give employees the necessary time to review the agreement without pressuring them to sign it immediately.

Layoffs in Indiana 

Employers with 100 or more employees are subject to the federal Worker Adjustment and Retraining Notification Act (WARN), which requires them to give prior notice for mass layoffs and plant closings.

Here are some of the requirements employers need to follow according to the WARN Act:

• Plant Closings: A plant closing happens when there is a temporary or permanent shutdown of a single employment site or operating units within that site. If this closure leads to an employment termination of 50 or more employees, excluding part-time workers, within 30 days, it is subject to the WARN Act. For a temporary plant closure, employers are required to give notice if it involves layoffs exceeding six months, a particular number of terminations, or a reduction in working hours by more than 50% for each month of a 6-month period.
• Mass Layoffs: Employers must issue 60 days’ advance notice when laying off 500 or more workers, or 50 to 499 workers, if they account for at least 33% of the facility’s total workforce.
• Notice Requirements: Notice must be issued to the employees affected by plant closings or mass layoffs, as well as their representatives, managers, supervisors, local chief elected officials and the state’s dislocated worker unit.

Resignations in Indiana

Resignations happen when an employee decides to discontinue their job, either voluntarily or involuntarily.

Voluntary Resignations

Voluntary resignations take place when an employee decides to leave their job for various reasons such as better opportunities or personal circumstances. In Indiana, employees can leave their jobs at any time, with or without any prior notice. However, providing notice is considered to be a courtesy. Employers can conduct exit interviews if possible to understand the employee’s decision and identify the areas that can be improved in the workplace for the current employees.

Involuntary Resignations

Involuntary resignations occur when an employee is forced to leave their job due to unacceptable circumstances created by the employer, such as changing job roles, reducing compensation, or conflicts in the workplace. Employees can file claims of constructive dismissal if they think they were compelled to discontinue their jobs because of the employer’s actions.

Legal Cases Related to Wrongful Termination in Indiana

1. Court Affirms At-Will Employment Doctrine in Wrongful Termination Case Against Indiana University

In the case of Wozniak v. Indiana University Board of Trustees, Amelia Wozniak filed a lawsuit against the Indiana University Board of Trustees and David J. Bodenhamer after being fired from her position as Director of Development Communications at The Polis Center, part of Indiana University (IU).

Ms. Wozniak claimed that her employment termination violated her constitutional rights to procedural protections that she believed were promised to her upon employment. She also brought up state law claims of constructive fraud and promissory estoppel. Ms. Wozniak argued that the defendants (Indiana University Board of Trustees and David J. Bodenhamer) misled her about her job and its benefits.

The court reviewed and concluded that Ms. Wozniak did not have a protected property interest as her employment conditions did not prevent IU from terminating her employment at will. She did not have an employment contract that could be referenced against the employment-at-will doctrine followed in Indiana. The absence of such a contract meant that her employment could be terminated without any reason or notice.

Ms. Wozniak’s claims for due process violations and wrongful termination were dismissed with prejudice by the court. Moreover, her claims of promissory estoppel and constructive fraud were dismissed without prejudice. The court found no assurances that could support a constructive fraud claim and there was no evidence that Ms. Wozniak relied on any protections associated with her job.

Key lessons learned from this case:

• Employment terms, especially concerning job security and procedural rights, should be clearly documented. This is because courts look for definitive evidence of agreements to uphold claims against employers.
• At-will employment states, such as Indiana, show that employees can be terminated at any time and for almost any reason, as long as it is not illegal, highlighting the importance of understanding that job security in at-will states can be minimal.

Learn more about Indiana Labor Laws through our detailed guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.