Indiana Termination of Employment

Back to Indiana

Assuming that an employee is employed on an at will basis, that employee may generally be terminated with or without cause or advance notice, provided there is no violation of otherwise applicable law, such as whistleblower, anti-discrimination, or anti-retaliation laws.  For example, Indiana prohibits the termination of an employee in retaliation for filing a workers’ compensation claim.  Indeed, an employment termination that occurs within "temporal proximity" of the time when an employee sought to avail himself/herself of the benefits provided by the Indiana workers’ compensation laws will likely be viewed as suspicious by the Indiana courts.  Further, termination or layoff of employees may engender litigation or charges filed with governmental agencies such as the federal Equal Employment Opportunity Commission ("EEOC"), the Indiana Civil Rights Commission ("ICRC"), etc.

Therefore, employers should consider whether the facts of each particular case justify termination of employment.  In some cases, termination may not be appropriate or timely.  Further, there may be some lesser sanction that is appropriate.  It is important to consider all circumstances in deciding upon a disciplinary course of action.
Moreover, in terminating employment, employers should assess the risks of workplace violence and take detailed precautions, where appropriate.  Employment counsel may need to be consulted before terminating employees.

In addition, large-scale reductions in force call into play other employment laws that require even more analysis to confirm whether there is a disparate impact on protected categories of employees.  Moreover, if there are a sufficiently large number of employees affected by a reduction in force, the federal Worker Adjustment and Retraining Notification Act ("WARN") may require 60-days' advance written notice to affected employees, certain union representatives (if any), and state/local government officials.  Unlike many states that maintain their own state law versions of WARN, there is no separate Indiana WARN act.  Employers in Indiana are regulated under federal WARN. 


All earned wages (including earned/accrued and unpaid vacation pay which is regarded as “wages”) must be paid with the final paycheck at separation of employment.  The same may be true of earned bonuses and commissions, under certain circumstances.

Severance Agreements / Releases

Severance pay is not required under Indiana law.  However, an employer may commit to paying severance compensation in an enforceable agreement, subject to the terms of that agreement.  If the employer wishes to have the employee sign a release of claims in consideration of the severance pay (which must be in addition to any compensation to which the employee was already entitled), federal law contains specific statutory requirements for waivers of age discrimination claims.  Also, federal law prohibits the waiver of certain claims, such as wage claims.

Unemployment Insurance / Compensation

The purpose of unemployment compensation is to provide benefits to those who are unemployed through no fault of their own. Therefore, to be eligible for payments, an applicant generally must either (1) have quit for good cause attributable to his or her employer or (2) have been terminated for reasons other than serious misconduct connected with his or her work. In addition, an applicant must be available and actively looking for work during the entire period of benefits, and (1) have earned wages in at least 2 quarters in the base year; (2) be unemployed for a waiting period of one week; (3) make a claim for benefits for each week of unemployment; (4) have registered to work and continue to report to the employment office; (5) be available and able to work; and (6) actively seek, but be unable to obtain work during the benefit year (365 days).

Unemployment benefits come from taxes paid by employers on wages of their workers. These taxes are put in a special trust fund that is used solely to pay unemployment benefits to workers who lose their jobs through no fault of their own. The benefits are intended to be temporary to help people with basic needs while seeking new employment. 

Most employers pay contributions under the experience rating provisions of the law at a rate of 2.7 to 5.4% of their total payroll. The employer’s contribution rate depends on its individual benefit ratio (benefits charged to its account for a certain period divided by its total payroll for the same period) as well as the level of funding of the Unemployment Compensation Fund.

To be “unemployed,” individuals must perform no services in a given week and receive no remuneration. In situations where individuals receive payments from their employers for periods in which they render no personal services, e.g., back pay awards, holiday and vacation pay, certain severance payments or employer funded disability pay, they are not “unemployed” and are not entitled to unemployment benefits.

Health Care Continuation (COBRA) Requirements

There is no Indiana law regulating notice to employees regarding the cessation of certain employment benefits upon their termination (or resignation) from employment.  Instead, such notification arises under a federal law known as the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). 

The Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) requires employers who provide employee health and medical benefits to provide notification to employees of their COBRA rights at the time of a “qualifying event” such as a resignation or an involuntary termination of employment. COBRA applies to employers with more than 20 employees. See the Federal Laws Regarding Employment section for more information.

Back to Indiana