US Regional Employment 2022 Comparisons

The COVID-19 pandemic has changed the workplace in Indiana and elsewhere in the world – likely permanently.

Some Indiana employers faced downturns, closures, and reductions in force; others have struggled to keep up with consumer demand and to overcome worker shortages. In the process, employers have changed the way workers interact with each other in traditional shared workspaces and non-traditional remote locations (ie, home workspaces). Many have become adept at remote means of handling employee onboarding, training, transfer of information, supervision, investigations and other processes.

Employers will continue to try to protect their employee populations and limit the risk that their workplaces become sites of community spread. Remote work has allowed for some employers to maintain productivity and service, potentially becoming – at least to some degree – the new “norm.” Employees are likely to proactively seek out employers that offer some type of remote work to avoid or limit long commute times, public transit, or even relocations.

The success of videoconferencing on platforms such as Zoom and WebEx during the pandemic has likely permanently changed the way employees communicate with each other and the outside world.

Global entities, including those operating in Indiana, continue to address antidiscrimination and antiharassment policies and commitment to social justice and diversity.

Global employers continue to emphasize their opposition to discrimination, racism and sexism. Those who do not may risk diminishing their reputations and may affect their ability to recruit, hire and maintain a diverse workforce.

The "Black Lives Matter" and "Me Too" movements placed the spotlight on discriminatory actions and practices, including systemic racism and implicit bias. This led employers to provide additional support and training to their existing workforces in an effort to mitigate against or eliminate bias, thereby enhancing their abilities to recruit, hire and develop diverse workforces.

By choice or necessity, many “gig” workers have gravitated or remained in short-term work relationships. Without a traditional work arrangement with a single employer, many gig workers do not receive employee-sponsored benefits (such as health and retirement benefits). Other workers engage in gig employment to supplement their traditional employment.

Within the gig framework, many workers consider themselves as self-employed – that is, able to set their schedule and choose their work assignments.

Technological platforms (particularly in connection with mobile phone and computer applications) facilitate connections between gig workers and those seeking their services. 

Employers must understand the challenges and risks of contracting for services and promoting contracted services. While the economy has drastically changed, applicable US law has not.

Employers (or entities contracting for services or personnel) must consider the costs, savings and potential risks related to particular choices in this framework. Misclassifying workers as "independent contractors" who should be classified as "employees" potentially leads to legal issues concerning collective bargaining, taxes, wage and hour compliance, benefits, and antidiscrimination laws.

Independent contractors typically have no such protections under federal and most state employment laws. The question of whether a worker or group of workers is properly classified can easily lead to disputes before administrative agencies, and state and federal courts. See more detailed information on the independent contractor relationship in 2.1 Defining and Understanding the Relationship.

Most companies prefer to operate union-free for various reasons, such as avoiding limitations on dealing directly with their employees, general workplace flexibility, and minimizing the risk of work stoppages. Union membership has been on a significant decline in the USA for decades, with private sector union membership hovering around 6.3%. Their ranks remain strongest on the coasts (eg, New York and California). The South historically has the lowest unionization rate, but many states in the Midwest, including Indiana, have seen their union numbers dwindle increasingly in recent years.

In Indiana, the percentage of workers represented by unions dropped from 9.5% in 2020 to 9% in 2020, which continues the downward trend in the state in recent years.

Indiana is a right-to-work state. As such, it is unlawful for a collective bargaining agreement in Indiana to require employees to pay union dues.

In 2022, there continues to be a national uptick in unionization efforts during the COVID-19 pandemic and following the change in the presidential administration, which is dramatically more favorable to unions. In fact, half way through 2022, union election petitions filed with the National Labor Relations Board are up by more than 56% compared with the previous year.

The National Labor Relations Board (NLRB, or the "Board") is vested with enforcing the National Labor Relations Act (NLRA), which provides workers with certain rights in relation to unionizing and to discussing and protesting their terms and conditions of employment. The NLRB governs private sector labor relations in the USA, and its regulations and administrative decisions apply to all 50 states. Consisting of five members appointed by the president, their views can change from administration to administration. Because the law is national in scope, no specific region, generally speaking, has a "leg up" on another when it comes to US labor law.

In August 2021, President Biden was able to get a majority of pro-union members appointed to the NLRB. He also appointed a very union-friendly NLRB general counsel. Although the NLRB has yet to issue any significant decisions, the general counsel already has made an impact by seeking expanded remedies against employers for labor law violations (eg, emotional distress damages, damages for loss of reputation, etc) and made settlement of charges more onerous (eg, accepting nothing less than full back pay in discharge cases).

It is expected that the NLRB will start issuing significant decisions that will impact employers in the latter half of 2022, including decisions that will invalidate many company personnel policies (eg, those pertaining to confidentiality and workplace civility) and make it easier for unions to organize workforces.

The “Great Resignation” has been identified as the national phenomenon involving the unprecedented numbers of workers who have appeared to have left the workforce. 

At the time of writing, however, Indiana’s labor force participation was on the rise at 63.9% (June 2022). Indiana’s total labor force, which includes Hoosier employed and seeking employment, is currently at the highest level since July 2018.

Although the national unemployment rate is 3.6% as of the date of this publication, there remain 10.7 million job openings in the USA – a major mismatch and disconnect for the labor market as a whole. 

Indiana’s current unemployment rate is among the lowest in the country. Statistically and anecdotally, despite an increasing labor force, employers have struggled to fill existing and expanding positions in certain parts of the state’s economy. 

Employers are increasing compensation and recruiting efforts in various industries are fierce. Many employers have complained about scarce job applicants, and certain consumer services have been negatively affected. Wage rates are increasing, with the increases affecting prices consumers are paying for goods and services.

Those employees who face employment termination, whether for performance or business reasons, remain in a good position to find replacement employment. This fact may cause problems for separated employees who bring litigation against their former employers and seek large monetary recoveries. Indeed, plaintiffs generally have a duty to mitigate their damages, and this includes by obtaining alternate employment and staying in the active labor force. 

It is important that the parties agree on the terms and conditions at the outset of their relationship, and ensure that the agreement reached is consistent with applicable law.

Employment

The default service relationship in the USA is that of employer and employee. Most states, including Indiana, are "at-will" employment jurisdictions, meaning either party (the employer or the employee) can terminate the relationship at any time and without having to provide a reason – provided, of course, that the termination decision is not otherwise prohibited by law (ie, due to discrimination or retaliation). Indiana is an employment-at-will jurisdiction, but an employer may forfeit its at-will right in certain circumstances – for example, employees may have contracts specifying the terms and conditions of their employment. Such contracts are not required in Indiana, but may be warranted depending on the type of employee in question (ie, an executive).

Barring a formal written contract, terms defining the relationship are typically relegated to documents such as offer letters, job descriptions, employment policies, or employment handbooks. To avoid any unintended obligation to employment for a specific term or for termination only under certain circumstances (for instance, “good cause”), employers should incorporate a carefully crafted disclaimer throughout employment documents.

Joint Employment 

Joint employment occurs when more than one entity is a worker’s employer. Joint employers are individually and equally responsible for compliance with labor, employment and certain other laws. Joint employment may be alleged with respect to various topics, inter alia:

• wage and hour law compliance;
• labor relations; and
• taxes and benefits.

For a third party to be considered a joint employer, generally it must have exerted significant control over the employee and codetermine matters governing the essential terms and conditions of employment. Factors to consider in determining joint employer status are:

• supervision of the employee’s day-to-day activities;
• authority to hire or fire the employee;
• promulgation of work rules and conditions of employment;
• issuance of work assignments; and
• issuance of operating instructions.

Under the NLRA, the NLRB currently may find two or more entities are joint employers if they are both employers within the meaning of the common law and if they share or codetermine matters governing the essential terms and conditions of employment. The NLRB has changed the standard it uses in this context several times over the years and may look to do so again under the new administration, so it is important to keep abreast of all changes on this front.

Independent Contractors

Contracting is commonplace in the USA and has become more prevalent in light of COVID-19, as more people have become comfortable working from home. The increase in the popularity of contracting has been matched by increased scrutiny from lawmakers and courts. There is no nationwide standard for determining whether a person is an independent contractor or an employee. Accordingly, most jurisdictions have come up with their own rules for determining employment status. California has the “ABC” test, which requires that the worker be free from control and operate their own business, and that they also perform work that is outside the usual course of the hiring entity’s business. This last part can be difficult to meet.

Indiana has adopted a flexible approach and distinguishes employees from independent contractors based on various factors:

• the extent of control that the employer may exercise over the details of the work;
• whether or not the one employed is engaged in a distinct occupation or business;
• the kind of occupation and whether this is usually done under the direction of an employer or by a specialist without supervision;
• the skill required in the particular occupation;
• whether the employer or the worker supplies the instrumentalities, tools and the place of work for the person doing the work;
• the length of time for which the person is employed;
• the method of payment, whether by time or by job;
• whether or not the work is a part of the regular business of the employer;
• whether or not the parties believe they are creating the relationship of employer and employee; and
• whether the principal is, or is not, in business.

Although no one factor is dispositive, the extent of control over the work performed by the worker is regarded by Indiana courts as the single most significant factor in determining the existence of an employer–employee relationship.

The federal Biden administration has signalled support for the California ABC employee/independent contractor test, which – if implemented by the federal US Department of Labor – will make it more challenging for employers throughout the country to classify their workers as independent contractors.

Internships

Internships have been subject to considerable scrutiny in the past few years – notably from the standpoint of whether private businesses can rely on unpaid interns. The US Department of Labor’s Wage and Hour Division has developed a test for evaluating whether an individual constitutes a "trainee" (intern) for the purposes of the Fair Labor Standards Act (FLSA). The factors considered in determining whether a for-profit employer lawfully can utilize an unpaid intern are the extent to which:

• the intern and the employer clearly understand that there is no expectation of compensation – any promise of compensation, express or implied, suggests that the intern is an employee;
• the internship provides training that is similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions;
• the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
• the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
• the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
• the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
• the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act. Indiana does not have different enforcement guidance.

The COVID-19 pandemic continues to negatively affect the ability of employers to attract and retain foreign national talent. The pandemic, and the federal government’s response, has disrupted virtually every aspect of the US immigration system. The processing of immigration benefits by US Citizenship and Immigration Services (USCIS) has dramatically slowed, and visa processing abroad by the US Department of State (DOS) has been impacted by lack of available appointments. 

Corporate Structure and Relationships

Employers are finding it increasingly difficult to sponsor foreign nationals for employment in the US. Increased scrutiny by USCIS and the DOS has resulted in lengthy delays in the adjudication process and greater rates of visa denials. Many local USCIS field offices have lengthy processing times due to staffing issues and a backlog from their closure earlier in the pandemic. The pandemic has also impacted the ability of US embassies and consulates to offer appointments for visas.

Employers often consider the H-1B and L visas when sponsoring foreign nationals for employment in the USA. However, owing to increased scrutiny and changes in the immigration processes for these visa classifications, employers may also wish to consider other options.

H-1B visas

The H-1B visa is generally reserved for specialty occupations. These are positions that, as a minimum for entry into the occupation in the USA, require:

• the theoretical and practical application of a body of highly specialized knowledge; and
• the attainment of a bachelor’s degree or higher in a specific specialty or its equivalent.

New H-1B petitions are sometimes subject to an annual lottery owing to high demand and USCIS has conducted a lottery in recent years. In 2020, the lottery underwent a significant processing change that resulted in the implementation of an additional fee for employers. This classification has experienced increased scrutiny in recent years, resulting in lengthy processing delays and increased rates of denial.

L visas

The L visa is generally reserved for international companies seeking to transfer executives, managers or specialized workers to the USA. Like the H-1B visa, the L visa has experienced heightened scrutiny, which has led to lengthy processing delays and increased rates of denial. In addition, a change in the immigration process for renewals has added to the length of time required for a renewal and increased costs.

Other visas

Owing to the challenges of securing visa sponsorship for foreign national employees through H-1B or L visa classifications, employers are exploring alternatives such as the H-1B1, E and TN visa classifications

H-1B1 visas

The H-1B1 visa is reserved for citizens of Chile and Singapore. Like the H-1B visa, the H-1B1 is generally restricted to specialty occupations. Similar in many respects to the H-1B visa, the H-1B1 is attractive to many employers owing to the relative ease and reliability of the H-1B1 sponsorship process. This visa classification is generally a more reliable and faster option than the H-1B visa.

E visas

Another option for sponsorship of foreign national employees is the E visa. This category includes treaty traders (E-1), treaty investors (E-2) and Australian specialty occupation workers (E-3). To qualify as an employee of a treaty trader or treaty investor, the employee must share the same nationality as the employer and be engaged in the duties of an executive, manager or specialized worker. The E-3 visa applies to Australian nationals performing services in a specialty occupation similar to the H-1B visa category but is more easily attainable.

As with the H-1B visa, employers have generally found the E visa to be reliable, fast and cost-effective. However, there is concern with timing owing to the lack of visa appointments at numerous US embassies and consulates as a result of the pandemic.

TN visas

The TN (NAFTA) visa allows employers to sponsor citizens of Canada and Mexico for employment in the USA in a professional capacity. Although NAFTA has been replaced by the United States–Mexico–Canada Agreement (USMCA), the latter retains the TN visa classification.

To be eligible for the TN classification, the profession must be noted on the treaty (list) and the foreign national employee must satisfy the qualifications for eligibility for employment in that profession. Employers have also found this visa classification reliable, fast and cost-effective in the main.

Of note, an employer seeking to sponsor a Canadian citizen for employment under this visa classification may simply have the sponsored employee present an application package directly to a US Customs and Border Protection agent. Unfortunately, Mexican citizens requiring a visa are generally required to attend an appointment at a US embassy or consulate.

To remain union-free, it is critical to establish a positive culture and get buyin from the employer’s leadership team. The vast majority of union campaigns start because of perceived toxicity in the workplace (eg, favoritism or no outlets for employees to express their views). Being union-free vests the employer with the autonomy to make decisions about policies and other terms and conditions of employment. If employees are represented by a union and/or ever vote a union into the workplace, an employer has a legal obligation to bargain virtually every potential change to workers’ terms and conditions of employment with the union.

Reaching a collective bargaining agreement with a union following its organization can also be a lengthy process. According to a recent analysis by Bloomberg Law, the length of time between a union being certified and a collective bargaining agreement being finalized with the employer averages 409 days. During this period, employers are not permitted to make unilateral changes in employee wages, hours and working conditions. Accordingly, many employers strive to remain union-free in order to enjoy maximum flexibility.

The pre-hire and interviewing process is a significant opportunity for Indiana employers to wisely identify and hire the strongest candidates for the available positions. Before the employment interview, employers should consider requiring applicants to complete an employment application that accurately describes prior educational and work history, reasons for leaving prior employment, references and any special skills.

Application Information

As a best practice, the employment application should include a certification by the applicant that they provided complete, accurate and truthful information on the application. This certification provides employers with a means to limit or mitigate damages in an employment discrimination case.

The employment application should also contain an affirmation of the at-will nature of the employment relationship, and employers should refrain from making verbal or written assurances of "long-term" or "permanent" employment – or other statements that could adversely affect the employer’s subsequent ability to successfully assert that the employee was employed at-will. In addition, to the extent that any post-offer testing is to be conducted, employers should include this information in the employment application to ensure that applicants are aware of the requirements and allow them to request any necessary reasonable accommodations.

The employment application and the interview process should not ask questions or elicit information about legally protected characteristics such as age, national origin/race, religious practices, pregnancy or desire to have children, sex, sexual orientation or gender identity, or medical conditions/disabilities. Similarly, it should avoid questions that would elicit this type of information.

Background Checks and Physical Assessment

A common aspect of the hiring process is a limited criminal background check for the successful candidate. Although this due diligence provides benefits for employers, such as a defense to a negligent hiring claim and the avoidance of a high-risk hire, this is an area of the law that is evolving on the national, state and local level.

The Equal Employment Opportunity Commission (EEOC) has taken the position that, given that minorities are disproportionately adversely affected with regard to convictions and arrests, a criminal conviction should only be considered if it is relevant to the particular position being sought. Employers should consider doing a case-by-case analysis and review the type of conviction, the date of the conviction, the nature of the job in question and any exceptional circumstances before making a decision about employment based on a criminal conviction.

Indiana has enacted a law that makes it unlawful for employers to refuse to employ or discriminate against a person because of a conviction that has been expunged. In addition, numerous cities across the country have been enacting "ban the box" laws that prohibit employment applications containing questions about criminal backgrounds. Indianapolis has enacted an ordinance applicable to any company doing business with the City. Thus, requests for and the process of background checks must be appropriately tailored to state and local laws, and proper authorization must be acquired when third-party vendors are used for this purpose prior to completing the background checks.

Another common component of a background check involves credit checks. Again, because credit checks tend to disproportionately disqualify minorities, it is best practice to conduct a similar analysis of the job-relatedness of a credit check to the position in question to avoid unnecessary legal exposure.

The Americans with Disabilities Act (ADA) also imposes restrictions on employers with regard to what information can be sought or discussed during the hiring process. The ADA generally prohibits employers from any pre-employment inquiries about an applicant’s medical condition. Thus, the employer may not ask any questions designed to elicit medical information prior to a conditional job offer being made.

After a conditional offer of employment has been made, the employer may then conduct a post-offer medical examination, provided that this is required of all applicants for the position. However, to withdraw an offer of employment, the employer must be able to demonstrate that the individual is unable to perform the essential functions of the job in question, even with reasonable accommodations. Thus, to the extent that post-offer testing is to be completed, employers should ensure that the components of the test directly correlate to the essential functions of the position. As this is a highly technical area of the law, employers are well advised to seek legal assistance with these determinations.

Similarly, the Genetic Information Nondiscrimination Act (GINA) imposes restrictions on employers during the hiring process (and afterward) that make it unlawful for employers to request genetic information with respect to employees. Because genetic information is defined broadly to include family medical history, employers should ensure that any post-offer medical examinations – even those conducted by occupational doctors – do not elicit this information.

Finally, the ADA requires employers to provide reasonable accommodation to disabled applicants to permit them to participate equally in the hiring process. Reasonable accommodations may take many forms, such as having an interpreter for a hearing-impaired applicant and administering a test in an accommodated format. The latter might include:

1. more time;
2. reading the questions aloud;
3. answering in a different format (eg, dictating); or
4. ensuring access to the testing site.

However, the employer is not required to "carve off" essential functions of the position in question, as such an accommodation would not be reasonable.

COVID-19 Creates New Issues

The COVID-19 pandemic has not changed the basic hiring process, but it has raised a host of new issues that might arise during the interactive part of proceedings, as well as causing employers to revisit what are the essential functions of a job.

An applicant may have an underlying condition (eg, asthma or diabetes) for which they seek reasonable accommodations that may not have been necessary to discuss before the pandemic. In addition, although attendance at the workplace on a day-to-day basis has historically been recognized as an essential function of the job, the success of remote work has forced many employers to revisit whether remote work may serve as a reasonable accommodation for a particular applicant/employee. 

The pandemic has led employers to begin asking basic health questions related to whether an applicant/employee has had symptoms relating to COVID-19 (eg, a temperature higher than 100.4°F). Many employers have also adopted mandatory vaccination policies. Making such inquiries and adopting vaccination policies generally are permissible. However, the employer would still have a duty to reasonably accommodate non-vaccinated applicants/employees if they have either a disability covered by the ADA or a sincerely held religious belief that prevented them from getting vaccinated.

The use of AI in the hiring process has become more common for large employers. Amazon and Hilton, for example, use AI to some extent to screen the thousands of applications they receive on a weekly basis.

To understand the potential legal issues posed by the use of AI, it is important first to understand what AI really is and separate fact from fiction. AI, in its current form, does not consist of computers making hiring decisions. The reality of AI is much simpler – it is typically a series of mathematical algorithms used to screen large quantities of data.

Employers have been using a type of AI for decades, albeit in a form most people now take for granted – text searching applications or resumes received. This process can now be automated with an algorithm so that a computer culls the applications by performing the text search. Certain online recruiting services such as LinkedIn Recruiter and ZipRecruiter use AI earlier in the process, via algorithms to search millions of potential candidates' social media profiles to determine whether to advertise a job posting to a potential candidate. AI can also be used in the interview process through the use of programmed “chat bots” that automatically ask a candidate a series of pre-programmed questions intended to discern information pertinent to the organization.

Finally, AI can be used to compare the experience of different candidates and, using a recommendation engine, can recommend either which candidates to extend offers to or the salary range to be offered to a candidate. In a nutshell, AI is particularly useful for routine tasks such as applicant screening that involve sifting through large quantities of data.

Although AI is sometimes viewed as a preferred vehicle for eliminating potential bias (eg, during job interviews), the reality is that AI has its own set of potential legal pitfalls. First, because AI is programmed by humans, the AI code developed may have the programmer’s conscious or unconscious built into it, as the programmer determines what data or parameters will be used. 

Courts have allowed claims based on unconscious bias to proceed under federal employment laws if the bias can later be proven to have resulted in intentional discrimination against a protected classification. Similarly, Title VII of the Civil Rights Act of 1964 recognizes a legal claim for disparate impact when a selection criterion adversely impacts a protected class. In 2018, Reuters reported that Amazon had scrapped an experimental AI recruiting tool when it determined that the algorithm used by the recruiting tool had learned to disfavor applicants whose resumes featured the term “women.” 

An AI hiring practice could also implicate the ADA if an algorithm made inquiries into an applicant’s physical disability, mental health or clinical diagnosis. These inquiries are prohibited by the ADA when in connection with pre-employment candidate assessment.

Employers remain eager to harness AI to eliminate potential subjectivity and to automate certain aspects of the recruitment and hiring process. However, the technology is still considered in its infancy and risks are abundant, which likely explains why many states have either passed or are considering legislation to protect candidates. In 2020, for example, Illinois enacted the Artificial Intelligence Video Interview Act (effective as of January 1, 2020).  The law imposes limitations on employers who use AI for candidate video interviews. Other states are considering legislation to limit the discriminatory use of AI, or have created task forces to study the issue. This area of law is likely to continue to evolve as more employers turn to AI in the hiring process.

The enforceability of restrictive covenants is heavily dependent upon state law, which can vary dramatically on this subject. Some states – such as California and North Dakota – consider non-competition and non-solicitation covenants to be void and unenforceable under almost all circumstances. However, other states – such as Louisiana and Oklahoma – will enforce contractual restrictions, but only if they meet specific criteria set forth by state statute. Accordingly, careful attention should be paid to the state law controlling the covenant at issue, which is either set forth by the parties in the contract or determined by the various jurisdictions where the parties are located.

Conditions for the Enforcement of Restrictive Covenants

Indiana will enforce restrictive covenants only if reasonable in scope and where the covenants do not unnecessarily interfere with a person’s livelihood. Accordingly, in order for a restrictive covenant to be enforceable, an Indiana employer must establish that it has a legitimate interest to be protected by the agreement, and that the restrictions imposed on the employee are reasonable as to time, activities and geographic area.

To show a legitimate, protectable interest, the employer must demonstrate that the former employee has gained a unique competitive advantage or ability to harm the employer before it can seek the protection of a covenant. In other words, not all employees in a company would be subject to a valid restrictive covenant. Post-employment restrictions on workers who have no knowledge that could harm the employer – for example, menial laborers such as cashiers or janitors – would likely be disregarded as unreasonably overbroad. On the other hand, if an employee has unique knowledge of a company’s trade secrets or proprietary business practices and methods that could be used for a competitor, an Indiana court may enforce the restrictions – provided that they also are reasonable in terms of time, geography, and the activities that are limited.

There is no definitive test for what is reasonable in terms of time; this depends on the facts of each particular situation. With respect to geography, the reasonableness of an agreement’s geographic scope depends on the interest of the employer that the restriction serves. Correspondingly, blanket clauses that prohibit an employee from calling on all customers of a company, including those that pre-date the employee’s employment or that the employee never serviced, are also considered overbroad and unenforceable. For the same reasons, prohibiting an employee from working for a competitor in any capacity would likewise be regarded as overbroad.

Another area in which states can vary wildly on this subject concerns what happens if a part of the covenant is determined to be unenforceable. Some states will throw out the entire covenant and refuse to enforce it, whereas others will permit the court to modify the terms to make it enforceable. Indiana adopts a middle-ground position, and will only strike out terms that are unenforceable, and will not alter or modify the text to make it enforceable.

Trends in the Enforcement of Covenants

Indiana has tightened its enforcement of such covenants. In 2020, the state enacted legislation adding restrictions to covenants involving physicians. Also, in 2019, the Indiana Supreme Court struck down a covenant that prohibited an employee from recruiting “any individual” employed by their former employer to work for a competitor. The court concluded that the ban on recruiting “any individual” did not serve a legitimate protectable interest of the former employer, was too broad, and also could not be repaired by striking out terms. As such, it was unenforceable.

Consequently, employers that intend to impose enforceable restrictive covenants on employees in Indiana must pay close attention to changes in the law and carefully draft the provisions to comport with those changes so they will not be perceived to be unreasonable.

Employees generally enjoy a certain zone of privacy, even while they are on an employer’s premises – for example, employers should refrain from searching an employee’s person or the interior of their private vehicle. Unwanted touching could be viewed as a battery that could subject the company and the particular manager to liability. Detaining an employee in a room and refusing to allow them to exit could be viewed as false imprisonment, resulting in the potential for liability.

Employers that provide electronic equipment for employees to use in connection with their job duties (eg, laptops and internet access) are generally permitted to adopt policies notifying employees of the right to monitor the use of such equipment and remind employees of their ownership interest in these devices. Employers can also impose reasonable requirements on how the employees use the equipment.

For the most part, these policies have been upheld on the grounds that employees have no reasonable expectation of privacy while using company equipment. However, this is not without limits: employers cannot demand that an employee involuntarily turn over their private cell phone, divulge their password to a personal email or social media account, or attempt to hack into the employee’s personal accounts – even if the employee used company equipment to access the private accounts. In short, aside from issues relating to the terms and conditions of employment (ie, wage/hours) on non-working time, employers have had a fairly wide berth in terms of regulating access and content in relation to the electronic devices and networks they make available for employees.

With respect to monitoring employee activities in the workplace, this generally is permitted under federal and state law; however, employers should exercise caution in doing so and should make sure that the employer’s actions are reasonable. Employees typically have no reasonable expectation of privacy on a factory floor. However, the same is not true for a bathroom or locker room. Thus, an employer can conduct video surveillance of work areas, lunchrooms, offices, parking lots and any other area of its business, with the exception of those areas where employees have a reasonable expectation of privacy from visual observation (such as restrooms and showers).

COVID-19 has altered the application of some traditional privacy rules. Generally, conducting medical tests or examinations on employees is prohibited. In the wake of COVID-19, the Centers for Disease Control and Prevention (CDC) and state and local authorities permitted reasonable measures, including temperature checks, asking questions regarding potential COVID-19 exposure, and testing to help curb the community spread of the virus.

Indeed, under the ADA, mandatory testing to check for an active case of COVID-19 (but not to check for COVID-19 antibodies) has been permissible if “job-related and consistent with business necessity”. However, in July 2022, the EEOC updated its technical assistance, noting that “evolving pandemic circumstances will require an individualized assessment by employers to determine whether testing... is warranted consistent with the requirements of the ADA.”

Various federal laws prohibit discrimination, harassment or retaliation based on legally protected characteristics or legally protected activity. Legally protected characteristics include age, sex, sexual orientation, gender identity, pregnancy, race, color, national origin, disability, military or veteran status, genetic information, religion, or citizenship status. In addition to federal laws, many states – as well as local governmental entities such as cities, counties and townships – have enacted laws that expand the coverage of legally protected characteristics.

The Indiana civil rights laws generally follow their federal counterparts. Moreover, many counties and municipalities in Indiana have adopted ordinances covering protected characteristics such as gender identity, marital status, and sexual orientation. Thus, it is important to understand and abide by all the laws in the jurisdiction in which the employer is located.

Employers should ensure that supervisors  understand and periodically receive training regarding:

• the types of behaviors that are inappropriate in the workplace;
• the methods to report concerns;
• their roles as members of the management team (both in communicating with applicants and employees, and in the investigatory process); and
• how to appropriately document and issue any discipline needed.

Employees should also receive training on – and understand – the applicable policies, the types of behaviors that would violate the policies, the mechanism to report concerns, and the non-retaliation provisions of the policies.

Critically examining corporate culture and policies in these areas and ensuring that employees – and especially managerial personnel – are properly trained to root out bias, harassment and prejudice has taken on even greater importance given the growing social awareness of these issues during the past few years. Coupled with the widespread use of social media, this has made many employers rethink their approach on these subjects from both a legal and a general business standpoint. Part of that process has led companies to shift their focus from just preventing illegal conduct to actively promoting more inclusive and respectful workplaces.

Notably, there has not yet been a general change in the legal standards by which employee performance is measured. However, many employers have taken it upon themselves to adjust how they view these sensitive topics by adopting policies and training programs consistent with promoting a culture of inclusion and paying more attention to equity and implicit bias concerns raised by employees.

Federal Law In General

The Occupational Safety and Health Administration (OSHA) is the federal agency charged with enforcing all applicable safety laws and regulations in the federal Occupational Safety and Health Act. Roughly 22 states have applied for, and have been granted, authorization to establish state plans to administer and enforce the applicable safety and health compliance program for private employers in their states. Although state plans must be at least as effective as the federal standards, states can be stricter than their federal counterpart with regard to regulatory compliance. Some states are more restrictive, which is a factor that a potential employer should evaluate.

Indiana has an approved state plan, and the Indiana OSHA administers the OSHA statutory and regulatory mandates. Indiana OSHA adopts and enforces standards issued by federal OSHA 60 days after the standard is adopted by federal OSHA (IC Sections 22-8-1.1-16.2). Although Indiana OSHA is required to enforce standards at least as effectively as federal OSHA, by law Indiana OSHA is prohibited from adopting or enforcing any standard that is more stringent than federal OSHA (IC Sections 22-8-1.1-17.5).

Generally, the employer’s obligation under the OSHA statute and regulatory framework runs to employees rather than third-party non-employees or members of the public. The COVID-19 pandemic resulted in a barrage of employee complaints that the employer is not providing them with a safe work environment, which challenged the federal agency given its current resources. Thus, employers are challenged by the need to both keep up-to-date with federal, state and local guidance and respond quickly to any complaints as they arise.

Federal Developments Related to COVID-19

Federal OSHA passed its Emergency Temporary Standard (ETS) for vaccination or weekly testing of employees on November 5, 2021. On January 13, 2022, the US Supreme Court held that OSHA exceeded its authority when it issued this standard as it went beyond regulating workplace safety. OSHA then formally withdrew its ETS, effective as of January 26, 2022. 

Since early 2022, OSHA has reverted to the General Duty Clause and existing standards, such as respiratory protection, to cite employers. However, it has primarily focused on healthcare employers and those employers engaged in the meatpacking industry when it comes to COVID-19 citations. 

On June 30, 2022, OSHA extended its National Emphasis Program (NEP) for COVID-19 indefinitely to protect healthcare employees as well as those working in the meat and poultry processing industries. OSHA’s Healthcare ETS for COVID-19 was enacted on June 21, 2021 but expired six months later. OSHA is still working on a permanent COVID-19 standard (or a broader one covering infectious diseases); however, it has not yet been completed. 

In the meantime, OSHA has reverted to advising employers to comply with its Guidance on Mitigating and Preventing the Spread of COVID-19 in the Workplace, which has not been revised since August 13, 2021. It recommends (but does not require) that employers:

• encourage COVID-19 vaccinations for employees;
• instruct sick employees to stay home;
• implement social distancing;
• provide face coverings to those employees in substantial- or high-transmission areas (which has been changed by the CDC to high-, medium- and low-transmission areas); and
• perform routine cleaning and disinfection.

Indiana Worker’s Compensation Framework

The Indiana workers' compensation framework has several advantages for employers, including relatively modest statutory caps on benefits available under the Act, the ability of the employer to direct authorized medical care, and a robust exclusivity provision. The Indiana Workers' Compensation Act is adjudicated through an administrative law structure, with hearings being held by a single hearing member assigned to that geographic location. Appeals from the decision of the single hearing member may be appealed to the full Board.

Employers throughout the US face federal laws that address compensation (for example, minimum federal wage and overtime). However, state and local governments impose broader and/or different mandates related to pay and benefits, including regarding paid time off, sick pay, vacation pay, minimum wage, reimbursement of business expenses, unemployment compensation benefits, workers' compensation benefits, tax rates and related areas. Quite simply, the cost of doing business in the USA varies by location (state, county and/or municipality).

The COVID-19 pandemic brought changes to the federal statutory framework that governs benefits and benefit plans, enhanced unemployment compensation benefits, and employee leave (paid and unpaid). Indiana, however, did not adopt any legislation specifically in response to the COVID-19 pandemic that affected compensation or benefits.

At-Will Terminations of Employment

Employment at-will should be disclosed to employees up front, preferably in writing (eg, employment application, offer letters, employee handbooks and acknowledgment forms), so there are no surprises if they are terminated at a later point in time. Care also must be taken throughout employment to ensure that the at-will status is maintained.

Terminations of Employment by Operation of Contract and Severance

If the employer and employee enter into an employment agreement that addresses how the employment relationship will end, the terms of the agreement will normally govern the situation. Employers should pay close attention to the language of the employment agreement, especially with regard to:

• defined terms addressing terminations for "cause";
• "change of control"; and
• provisions describing the renewal of the contract.

Employees typically are not entitled to severance unless the employer agrees to provide it pursuant to the terms of an agreement or policy. If the employer offers severance, best practices dictate that such payments be contingent upon the employee releasing and waiving any claims against the employer (unless a waiver is precluded by explicit operation of law).

Separation Agreements and Releases

Separation or release agreements are treated as contracts and will generally be subject to enforcement in a similar manner. One significant caveat, however, concerns waivers for employees over the age of 40. The federal Age Discrimination in Employment Act (ADEA) prohibits discrimination against individuals over the age of 40 and applies to companies with 20 or more employees. In order for a waiver of claims under the ADEA to be valid, it:

• must be written in plain language that is understandable by the average individual eligible to participate;
• must specifically refer to ADEA claims and rights;
• must not cover prospective (future) rights;
• must be in exchange for valuable consideration in addition to any benefits or amounts to which the employee was already entitled;
• must advise the employee, in writing, to consult an attorney before signing;
• must provide the employee 21 days to consider the agreement; and
• must be revocable at least seven days after the employee signs it.

In the case of a group termination – which can be as few as two employees – employees age 40 or over must have at least 45 days (instead of 21 days) to consider the agreement (with a comparable seven-day revocation period). Additionally, the affected employees must be provided with a memorandum identifying:

• the class of employees eligible to receive the severance package;
• the specific eligibility requirements;
• time limits on participation;
• the ages of all employees selected for the program; and
• the ages of all employees in the same job classification or organization who are not eligible or selected for the program.

Beyond federal law, some states (albeit not Indiana) require additional provisions to ensure that a release is valid. As such, the current state of the law in the applicable jurisdiction must be reviewed before any release is prepared and presented to an employee.

WARN Obligations

Terminating multiple employees may trigger requirements under another federal law (the Worker Adjustment Retraining and Notification Act of 1988, or WARN) if a sufficient number of employees are affected. This law applies to any business that employs 100 or more employees (excluding part-time employees).

Under the law, if an employment loss results in a "plant closing" or "mass layoff," a qualifying employer must provide affected employees and certain government officials with at least 60 days' advance notice of the event. Employers that fail to provide the requisite notice can be required to pay the affected employees’ back pay for each day of the violation, reimburse them for the loss of benefits and any medical expenses they incurred, and may also have to pay civil penalties.

In addition to the federal WARN Act, many states have their own mini-WARN acts. Indiana does not have a mini-WARN statute and follows the federal law.

COVID-19 forced many employers to quickly shutter their businesses and lay off large numbers of workers as a result of government lockdown orders, resulting in a widespread failure to provide the required WARN notices. However, WARN (and many of the corresponding states with mini-WARN statutes) expressly recognizes an unforeseeable business circumstances exception where an employer is excused from the statutory timetable – provided exigent circumstances exist and the employer provides the applicable notices as soon as practicable.

Additional COVID-19 Considerations

COVID-19 presented several additional challenges regarding terminations, including some relating to leave under the Families First Coronavirus Relief Act (FFCRA). At the time of writing, Indiana employers do not have any leave obligations in relation to COVID-19 other than those under the federal Family and Medical Leave Act (FMLA) and potential reasonable accommodation requirements under the ADA.

Alternative Dispute Resolution

The law in the USA generally favors the private adjudication of disputes.

If the employer and employee have entered into an enforceable agreement to arbitrate a dispute, and the disputed matter is the type of claim that the parties agreed to arbitrate, courts typically will order the parties to proceed to arbitration. Arbitration can cover the full range of employment-related disputes.

Generally, in Indiana (and most other states) employers can easily retain workers on an "at-will" basis so that no "breach of contract" claims can be brought against the company upon an employee’s separation. Care must be taken, though, to ensure that a company follows a state’s requirements for keeping employees at-will.

Employees are generally presumed in Indiana to be at-will, absent an agreement with the company to the contrary. A best practice in Indiana is to have "at-will disclaimers" included in offer letters, as well as any employee handbooks/manuals, that state all employees remain at-will unless the company enters into a written agreement to the contrary. Having such disclaimers in all handbooks/employee manuals remains critical. In the event that the company offers employment contracts to some or all of its workers, a company that violates those agreements – for example, terminating the workers for a reason arguably not provided for in the agreement – may face contractual claims for breach of contract. To the extent that claims for contractual rights are brought, they most often are filed in court; however, depending on the contract, they can also be pursued in arbitration.

In union environments, the labor agreement between the parties controls employees’ terms and conditions of employment, including termination decisions. Violations of labor contracts are mainly adjudicated in arbitration, including disputes over employee discharges.

Damages for contractual claims are most frequently tied to the alleged harm suffered. If an employee had a five-year employment agreement and argued they were terminated improperly three years prematurely, for instance, the employee – if successful – would be entitled to three years' pay. It is important to note, however, that some contracts may provide for one or both parties to receive attorney fees or additional categories of damages in the event they prevail in a dispute under the agreement, which can be significant sums.

Many federal laws prohibit discrimination, harassment or retaliation based on legally protected characteristics or legally protected activity (as listed in 4.3 Discrimination, Harassment, and Retaliation Issues). In addition to federal laws, many states – as well as local governmental entities such as cities, counties and townships – have enacted laws that expand the coverage of legally protected characteristics.

The Indiana civil rights laws generally follow their federal counterpart. However, Indiana law will also protect the off-duty use of tobacco, for example, for which there is no federal counterpart. Moreover, many counties and municipalities in Indiana have adopted ordinances covering protected characteristics such as gender identity, marital status and sexual orientation. It is important to understand and abide by all the laws in the jurisdiction in which the employer is located.

Employers are well advised to ensure that supervisory training and other programming is periodically provided to communicate:

• behaviors that are inappropriate in the workplace;
• the methods to report concerns;
• their role as a member of the management team (both in communicating with applicants and employees, and in the investigatory process); and
• how to appropriately document and issue any discipline needed.

Employees should also receive training on the applicable policies, the types of behaviors that would violate the policies, the mechanism to report concerns, and the non-retaliation provisions of the policies.

In light of the "Me Too" and "Black Lives Matter" movements, many employers are also including enhanced diversity training and other programming designed to foster an inclusive, respectful and discrimination-free workplace. Employers are wise to illuminate the varying perspectives employees bring to the workplace as a result of their life experiences. Employers are also becoming engaged in the social justice movement, supporting these movements in a variety of ways.

As a result of the COVID-19 pandemic, there has been an increase in claims arising under these federal antidiscrimination statutes. These claims pertain to discriminations such as:

• failure to accommodate disabilities under the ADA;
• interference or retaliation against employees requesting leave under the FMLA or opposing vaccine mandates; and
• adverse actions based on an employee’s protected characteristic – for example, assuming that older workers should remain furloughed during the pandemic.

Indiana Employers Must Follow the FLSA

With few exceptions, the FLSA governs wage and hour claims brought by employees in Indiana. The FLSA requires that all covered, non-exempt employees be paid at least minimum wage for every hour worked, and receive overtime pay at no less than 1.5 times the regular rate of pay for all hours worked in excess of 40 within a working week.

Potential federal wage and hour-related claims include:

• misclassification of a worker as an independent contractor or consultant (rather than as an employee);
• misclassification as exempt from overtime pay;
• payroll docking policies and practices;
• “off-the-clock” unpaid work hours;
• meal periods;
• breaks;
• overtime;
• record-keeping;
• deductions from pay; and
• time-clock rounding.

Indiana-Specific Pay-Related Laws

Indiana law addresses various aspects of employee compensation, including minimum wage, overtime, tipped employees, underpayment and non-payment of wages, deductions, payroll practices, and other pay-related matters. 

Indiana law addresses when and how an employer can deduct money from an employee’s paycheck and the necessary timing of paychecks. An employer may not fine an employee or take any fine out of any employee’s paycheck.

An Indiana employer must pay its employees a semi-monthly (or, if requested, bi-weekly) payment for all earned wages due for services rendered to the employer. Payment shall be made for all wages earned to a date not more than ten business days prior to the date of payment.

Subject to certain requirements, an Indiana employer may deduct the amount of overpayments from paychecks. Otherwise, deductions from paychecks must be pursuant to an agreement specified by law for a purpose listed by statute.

Indiana law addresses the payment of accrued vacation pay. An Indiana employee may be entitled to a pro rata share of accrued vacation at the time of termination. However, if there is a company policy or employment contract stipulating that certain conditions must be met before accrued vacation pay will be paid, these conditions must be met in order to receive accrued vacation pay. Vacation policies are generally left to the discretion of the employer.

An Indiana employer may require an electronic direct deposit and may provide pay statements to employees electronically.

An Indiana employer who fails to pay wages when due may be subject to statutory penalties, including reasonable attorney fees incurred by the employee to collect unpaid wages. In addition, if the court finds that a failure to pay was due to the employer’s bad faith, the employer may be subject to pay an amount equal to two times the amount of wages due the employee.

Collective and Class Actions for Unpaid Wages

Finally, because an individual employee’s claim may be small, any wage claims may be brought in a class action (referred to as a Rule 23 class) or a collective action under Section 216(b) of the FLSA. Through either framework, a large number of employees citing similar wage or compensation errors may join together to seek back pay, front pay, punitive or liquidated damages, and attorney fees.

Carefully crafted individual agreements to arbitrate claims, including a waiver of the right to proceed in a class or collective action, may help combat the risks and costs associated with class and collective actions.

There are a variety of federal and state laws that protect employees who report perceived unlawful acts. Even if it is ultimately determined that the employee’s perception is wrong, the employee generally will still be protected unless the employer can establish that the employee knew they were making a false report. The types of conduct that afford this protection include:

• on-the-job safety issues;
• violation of federal or state antidiscrimination laws;
• violation of the federal Affordable Care Act;
• wage payment violations;
• environmental violations;
• fraud against the government;
• financial misconduct, including false reporting of financial information or tax evasion; and
• misappropriation or misuse of investor funds in a public company.

To successfully defend against such a whistle-blower claim, the employer must typically provide substantial evidence of its non-retaliatory reason for the discipline or discharge.

The growth of social justice movements has created increased awareness of the ability to pursue government redress of grievances. Although Indiana has not yet done so, some states have adopted laws that prohibit confidentiality provisions in separation agreements if they prevent employees from discussing the facts of a discrimination or harassment claim with government agencies.

The impact of COVID-19 also has seen employees reach out to government officials to express concerns regarding a variety of health-related issues, including hygiene protocols and adherence to social distancing and mask mandates that have been adopted by government bodies. These contacts can result in investigations and potential actions by law enforcement, state health agencies, and the state and federal OSHA.

The growth of various social justice movements has caused many employers to reassess their training programs with respect to discrimination and harassment. The previous focus on simply preventing illegal conduct has shifted to one fostering a culture of inclusion. Part of that process involves giving greater emphasis to identifying bias, including unconscious or implicit bias; a greater awareness of and sensitivity to these issues, particularly on the part of human resources personnel and managers; and strengthening the mechanisms by which employees can express concerns and by which those concerns will be evaluated. The promotion of environments that encourage reporting and offer multiple avenues to bring concerns forward, coupled with an appropriate response to the behaviors at issue, are important components of such a program.

In addition to wage and hour claims (addressed in 6.3 Wage and Hour Claims), certain forms of discrimination claims are often brought in a class action under Federal Rule of Civil Procedure 23. A class action allows a large number of employees citing similar alleged discriminatory practices to join against an employer to make claims for monetary and equitable relief.

Potential damages vary depending on the statute under which an employment-related claim is brought, but may include items such as unpaid wages, back pay, front pay, attorney fees, and punitive or liquidated damages. The court can also order the employer to reinstate/rehire employees found to have been improperly discharged.

In class and collective actions, the remedies may be multiplied by the number of employees implicated. Seemingly minor errors in the payment of wages, which by themselves would not cause concerns about litigation by an individual plaintiff, can mutate into high-stakes litigation when large numbers of employees and former employees combine and become eligible for unpaid wages, liquidated damages and penalties, and attorney fees and costs – particularly when the potential minor errors span a number of years.