At will Employment in Indiana and Other General Issues

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At Will Employment
Indiana employers may enter into contractual relationships with employees setting forth terms and conditions of employment including with respect to issues concerning termination of employment.  In such cases, the terms of the contract will be the main evidence affecting the outcome of disputes between the employer and employee, assuming that the contract is sufficiently detailed to cover the point(s) of dispute.  Further, employers in Indiana can set forth a set duration or period of employment during which an employee typically cannot be terminated without some reason or cause sufficient to justify the termination of an at will employment relationship.


Alternatively, an employee hired for an indefinite period of time and without an employment contract is called an “at will employee.” What this means is that the employer or the employee may terminate the employment relationship with or without cause, and at any time. Further, there is no legal requirement of providing advance notice of the termination of an at will employment relationship.

Indiana law recognizes the at will employment doctrine, but subject to certain narrowly defined exceptions. There are also federal law restrictions on an employer's right to terminate an otherwise “at will” employee. 

Indiana State law exceptions to the general at will employment doctrine include the following judicially-created and narrowly-construed exceptions that apply when the employee is exercising a statutorily-protected right or performing a statutorily-required duty.  Recognized exceptions include:  attendance at jury duty, filing (or threatening to file) a worker’s compensation claim, and refusal to perform an illegal act (i.e., refusing to drive a truck that is in excess of legal weight limits).  Also, employment that is for a fixed term for which the employer and employee have agreed to restricted reasons for discharge, or in which the employee was hired by the employer with knowledge that the employee gave up job protected status with a prior employer to take the new employment, is not at will. 

When an employer hires an employee for a temporary period or for a season, the temporary employee is still an at will employee of the employer, and the relationship is governed by the same laws as those applicable to at will employees. As with permanent employees, legally mandated benefits, such as workers’ compensation insurance and unemployment insurance, must be offered to temporary employees. Optional benefits, such as 401(k) plans, need not be offered to temporary employees.

Independent Contractors
Some employers may choose to hire or use the services of independent contractors to perform certain services. A true independent contractor is not considered an employee of the employer.

However, it is important to note that courts and government agencies reviewing the relationship between an employer and individuals, who are alleged to be independent contractors, will look beyond the label given to the relationship by the employer and individual.  Instead, the courts and agencies will examine the substance of the working relationship. For instance, federal and state governmental agencies (such as tax agencies like the Indiana Department of Revenue, worker's compensation agencies such as the Indiana Workers Compensation Board, Indiana and federal departments of labor, etc.) have a variety of tests for determining whether a worker is truly an employee or an independent contractor.  The exact tests will vary, to some extent, by agency.  However, for the most part, the tests deal with whether the employer had the right to direct and control not only the end result of the work being done, but also the manner in which the work was to be performed.  Furthermore, there will be some review of other factors including:  whether the individual held himself/herself out to other employers or the general public as performing the same or similar services; the manner of payment to the individual for the services; and the length of the working relationship.

Incorrectly classifying an employee as an independent contractor is an extremely serious matter.  Not only can claims be made for things such as overtime pay and employee benefits, there can also be assessment and collection of unpaid payroll taxes, interest, and penalties and exposure to employment-related lawsuits and administrative claims. The cumulative impact of these claims, lawsuits and penalties can be sufficiently serious to cause the employer to go out of business and close its doors.

Employment Agreements and Enforceability
As mentioned above, employers can enter into an employment agreement with an employee and such agreements are generally enforceable under Indiana law (assuming unlawful provisions are not part of the agreements).  Such agreements can contain covenants: not to compete (in various forms); to maintain confidentiality over certain information/data; not to attempt to recruit employees away following the employee's employment; not to solicit employer customers/clients following the employee's employment, etc.  Under Indiana law, there are, of course, requirements that certain such covenants be reasonable and tailored to the employer's protectable interests.

Employment Records
For the most part, federal law supplies retention requirements for employment records. Nonetheless, we recommend that Indiana employers maintain the following records, for the time periods specified below.  Employers are free to maintain records for longer periods and should do so when there is litigation or a reasonable risk of litigation, as directed by counsel and litigation "hold" policies and directives.  In Indiana, employees of private employers do not have any rights to access personnel records, except as part of discovery in litigation.  Public sector employees do have access to records under certain circumstances.

Medical records and other confidential documents, such as investigative files for harassment claims, should be maintained apart from an employee’s regular personnel file and should be kept confidential and access should be restricted to those management officials with a legitimate business need for such information.

Overview of Common Record Retention Requirements Under Indiana and Federal Law

Period of Retention
Records to be Retained
1 year
Personnel records relating to (1) job applications, resumes or other replies to job advertisements, including records pertaining to failure to hire; (2) promotion, demotion, transfer, selection for training, layoff, recall or discharge; (3) job orders submitted to employment agency or union; (4) results of any physical examination if the employer considered it in connection with any personnel action; (5) records of employer-administered aptitude or other test; and (6) job advertisements or notices to employees regarding openings, promotions, training programs, or opportunities for overtime work.  (ADEA, ADA, Title VII)

Personnel and employment records are required by Executive Order if the employer/federal contractor has fewer than 150 employees or does not have a contract with the federal government of at least $150,000.  An employer/federal contractor with more than 150 employees or a contract of more than $150,000 must retain relevant records for two years. (OFCCP Regs)
 2 years
For government contractors and any other entity governed by the Rehabilitation Act: job descriptions, job postings and advertisements, records of job offers, applications and resumes, interview notes, tests and test results, written employment policies and procedures and personnel files.  (Rehabilitation Act, Executive Order 11246)

Personnel or employment records of public elementary or secondary schools.  (Title VII, ADA)

From date of last entry, basic employment and earnings records, wage rate tables, records of additions to or deductions from wages paid, work time schedules, orders, shipping and billing records, job evaluations, merit or seniority systems, or other matters that describe or explain the basis for payment of any wage differentials to employees of the opposite sex in the same establishment, and records of deductions from or additions to pay.  (FLSA, Title VII, Walsh-Healey, Davis-Bacon) Reasonable accommodation requests.  (ADA)
 3 years
 From last date of entry, payroll records containing each employee's name, address, date of birth, occupation, rate of pay and compensation earned per week.  (ADEA)

Basic certificates payroll records, relevant union or individual employment contracts, collective-bargaining agreements, applicable and notices of Wage-Hour Administrator, and sales and purchase records.  Also, injury frequency rates, gender and identifying contract number for Walsh-Healey.  Substantiation records must be kept for at least two years.  (FLSA, Walsh-Healey, Davis-Bacon, ADEA)

Records relating to discrimination charges.  (Title VII, ADA, ADEA, Rehabilitation Act)

Records relating to sex and occupation of members of workforce and basis of wage differentials.  (EPA)

Employment eligibility verification (Form I-9)  (IRCA)  (Statute requires  I-9s be retained until the later of (1) three years from employee's date of hire; or (2) one year after the employee's termination.)

Dates leave taken under FMLA, copies of employee notice, documents describing employee benefits, employer policies regarding paid and unpaid leaves.  (FMLA)

Polygraph tests and results.  (Employee Polygraph Protection Act)

Bloodborne pathogen safety training.  (OSHA)
 5 years
Records pertaining to payments to union representatives and employees, payments for interfering with employee rights and arrangements with labor consultants.  (Landrum-Griffin Act)

Form 301; Form 300 Log and Summary of Occupational Injuries and Illnesses, Privacy Case List, and Annual Summary. (OSHA)

Payroll and certain personnel records.  (Rules of the Indiana Department of Employment and Training Services.)
 6 years
 ERISA plan disclosures, annual reports and summaries.
 30 years
Medical records for employees with occupational exposure to bloodborne pathogens.  (OSHA)

All employee medical and exposure records under OSHA's Toxic and Hazardous Substances Standards (must be preserved and maintained for at least the duration of employment plus 30 years).
 Pending Litigation
 From the time that a company has notice of a Charge of discrimination or other employment-related litigation, particular effort must be made to preserve documentation which could be relevant to the defense or prosecution of the claim.  This includes the personnel file of not only the charging party, but also of other potential comparables.  Special care should be taken to preserve electronic data which could be relevant.

Upon receipt of a Charge of Discrimination or other litigation, a company's IT department should be notified to immediately preserve electronic data which could be relevant.  Such documentation should not be destroyed until final disposition of the matter and even then only if the documentation does not pertain to other potential claims.  (Title VII, ADA, Executive Order, Zublake)

Employee benefit plans, written seniority or merit rating plan, period plan or system is in effect plus one year.  (ADEA)
 Not Specified
 Written affirmative action plans.  (OFCCP Regs)
 
EEO-1 reports that are required of employers with 100 or more employees.  (Title VII)

Certificates of Age must be retained for the duration of the employee's employment.  (ADEA)

Medical records and other confidential documents, such as investigative files for harassment claims, should be maintained apart from an employee’s regular personnel file and should be kept confidential and access should be restricted to those management officials with a legitimate business need for such information.

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