The “Me Too” movement emerged and developed to address issues of sexual harassment and assault in the workplace, but has had broader effects. Not only has reported sexual harassment and/or assault caused the departure of some high-profile male executives from their companies, but it has prompted numerous state-enacted statutes addressing this conduct in the workplace. Employers are limited in their ability to confidentially resolve these workplace claims.

The effect of “Me Too” extends beyond sexual harassment and assault. Global entities, including those operating in Indiana, continue to take a hard look at anti-discrimination and anti-harassment policies, and commitment to social justice and diversity in light of “Me Too” and key events throughout the United States that highlight ongoing issues in these areas.

On an increasingly illuminated stage, with pressure to be transparent, employers are re-examining how they manage their workforces and interact with their local and broader communities.

Many employers have long been on a path of reframing how they view sensitive issues, with many shifting the focus from simply preventing illegal conduct to adopting a proactive approach in promoting a more respectful and inclusive work environment, as well as considering matters of employee well-being. Global businesses have taken their commitment to diversity, inclusion and equity beyond their own walls, emphasizing their commitment to societal change.

Traditional training has focused on legal requirements, civility, respect and bias (including unconscious bias) and on educating workers on multiple avenues to identify concerns to employers.

While US employers have adopted and implemented long-standing policies prohibiting harassment based on legally protected characteristics, the attention placed on this issue by the “MeToo” movement and the publicity generated in recent high-profile cases have initiated a seeming cultural shift from preventing conduct that is illegal to promoting a respectful and inclusive work environment.

The post-“Me Too” shift can be seen in training being provided by employers (now more focused on civility training and respect), as well as the focus of anti-harassment policies. 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.

Most employers prefer that political opinions and disputes do not interfere with productivity, safety, and employee well-being. This goal has become more difficult in recent times, largely because of the divisiveness related to COVID-19 and the broader political arena. Employers saw political and social disagreement in the heat of COVID-19. This disagreement caused legal claims invoking religious freedom and regarding personal protective equipment and accommodations. 

Employers may seek to address disruption of employees’ political expression at work. However, even private employers face challenges if political expression relates to protected concerted activity. When discord occurs at work, employers face potential restrictions on what they can control. In relation to a National Labor Relations Board (NLRB or “the Board”) case involving Lion Elastomers LLC, the agency indicated in a press release: “…labor disputes are often heated, as the Supreme Court has recognized. The Board reaffirmed the principle that employees must be given some leeway for their behavior while engaging in protected concerted activity, in order to safeguard their statutory rights.”

The NLRB now says employees, depending on circumstances, cannot be disciplined for certain outbursts, even if they use profane and abusive language. This approach is a departure from recent precedent, which afforded companies more discretion to discipline in these cases.

Employers largely seek to avoid discord related to differences in political opinions.

Employees often seek advice of counsel in connection with any layoff, reduction in force or restructuring to see if specific decisions were based on a category protected by federal law such as race, age, sex, etc. 

Naturally, decisions on employees impacted by any such layoff, reduction in force or restructuring should not be based on an employee’s protected characteristic. In addition, employers should review their decisions to ensure that the selection criteria do not have a disparate impact on a protected characteristic such as race or age. 

The Equal Employment Opportunity Commission (EEOC) has noted that the Age Discrimination in Employment Act applies to practices that are neutral on the face of it, but that might harm older workers more than younger workers, and that apply to groups of people, such as procedures used to identify persons to be laid off in a broad reduction in force.

To mitigate the potential risk of employment-related claims that may arise from a layoff, restructuring or reduction in force, employers should consider the possibility of severance agreements. Although severance agreements are not required by state law, such agreements may include a waiver and release of all employment-related claims.

Finally, employers should develop a communication strategy concerning the basis for the layoff, reduction in force or restructuring, both for those employees who may be separated, as well as employees who are retained, as any layoff, reduction in force or restructuring is likely to create uncertainty and anxiety for employees who are retained. Such uncertainty could potentially lead to additional attrition in the workforce, or employees may seek the protection of an outside organization such as a labor union.

In McLaren Macomb, a Michigan hospital offered severance pay to a group of employees in exchange for signing severance agreements. The severance agreements included non-disparagement and confidentiality obligations. The NLRB held that these provisions were unlawful because they interfered with National Labor Relations Act (NLRA) Section 7 rights.

In the eyes of the NLRB, “public statements by employees about the workplace are central to the exercise of employee rights under the [National Labor Relations Act]” and contractual provisions that prohibit disclosure of the agreement’s terms have a chilling effect on employees’ ability to exercise their Section 7 rights. 

Under McLaren, an employer not only violates the NLRA by executing an agreement containing such language, but also does so by merely offering an agreement that conditions severance benefits on the waiver or restriction of an employee’s rights under the Act even if the employee does not sign it. 

Notably, the McLaren decision applies only to “employees” as defined under the NLRA, which excludes supervisors, managers and executives, and therefore, employers can continue to protect their reputation and/or confidential information by including non-disparagement and confidentiality provisions in agreements with these types of employees. In addition, employers can generally still protect their confidential information by narrowly drafting confidentiality provisions to protect true trade secrets and confidential business information and “know-how”, while not interfering with employees’ protected activity.

The McLaren decision is simply one example of the current NLRB following through on President Biden’s commitment to be the “most pro-union President ever”.  Although it has not moved as quickly as many pro-labor adherents had hoped, the NLRB has steadily undone or reversed the decisions of the former administration’s NLRB. Examples include the following:

• Lion Elastomers, 372 NLRB No 83 (May 1, 2023), provides greater protection to employees who engage in profane or abusive conduct towards management while also engaging in protected activity.
• Stericycle, Inc, 372 NLRB No 113 (August 2, 2023), reverses the NLRB’s previous Boeing, Co decision concerning whether policies contained in an employer handbook violate the NLRA. Under Stericycle, the Board will evaluate work rules from the perspective of an “economically dependent employee” to determine whether they have a “reasonable tendency to chill” protected conduct. If so, the rule violates the NLRA unless the employer can demonstrate that – (i) the rule advances “legitimate and substantial business interests”, which (ii) “cannot be achieved by a more narrowly tailored rule”.
• Atlanta Opera, Inc, 372 NLRB No 95 (June 13, 2023), expanded the definition of “employees” under the NLRA and found that makeup artists, wig artists, and hairstylists were “employees” covered by the NLRA, and not independent contractors. Companies using independent contractors should be attentive to this ruling that has potential broad ramifications for the recently expanded gig economy.

Unions have dramatically increased their organizing activity post-pandemic. Unions are organizing and seeking to organize companies that historically have not been targets of organizing attempts or that have traditionally been non-union, such as Starbucks, Apple and Google.

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.

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.

Support for Unions

With respect to organizing campaigns, it is expected that unions will continue to attempt to capitalize on worker militancy and concerns over health and safety issues. The pandemic may have caused younger workers in particular to re-evaluate the things that they value the most. Several observers have noted that much of the recent union success is with workforces consisting of younger, college-educated workers in service-sector jobs, who feel they are overworked and underpaid. Public sentiment has swung back towards unions as well. A recent survey found that about two thirds of Americans say they support unions, the highest approval rating since 1965. 

To the extent that a company desires to remain union-free, the importance of hiring strong HR and employee relations staff who can establish a positive culture and get buy-in from the managers cannot be overstated. 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 organization with the autonomy to make decisions about policies and other terms and conditions of employment.

Time Taken to Reach a Collective Bargaining Agreement

Reaching a collective bargaining agreement after a union has been organized can also be a relatively lengthy process. 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 pro-labor decisions coming from the NLRB will likely only continue to embolden union organizers and workers alike, as will recent publicized union successes at the bargaining table, with unions having negotiated significant wage increases with prominent employers. Unions have also shown continued militancy, as reflected by the number of employees that have engaged in strikes in 2023. 

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. Failure to do this properly at the commencement of the employment relationship creates unnecessary uncertainty and increases an organization’s legal exposure.

Employers should guard against reliance on independent contractors unless those relationships are clearly defined. Incorrectly identifying a worker as an independent contractor (instead of an employee, with the benefits employment status requires) exposes an organization to a range of liabilities.

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 (eg, 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 (eg, “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, including:

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

For a third party to be considered a joint employer, generally it must exert 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 but became more prevalent during and after the pandemic, as more people became 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.

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 instruments, 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 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 signaled 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. If adopted by the Department of Labor, it is likely that such an interpretation would be followed by the Georgia federal courts tasked with interpreting federal employment laws. In addition, as noted in 2.1 Aggressive Approaches by the National Labor Relations Board (NLRB), the NLRB recently issued a ruling in the Atlanta Opera, Inc case and found that makeup artists, wig artists, and hairstylists were “employees” covered by the NLRA, and not independent contractors. Based on this case, it may now be more difficult to classify workers as independent contractors under the NLRA.

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 can lawfully 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 course work 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 pandemic, and the federal government’s response, have 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 the 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 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. While the processing of immigration benefits by USCIS has recently improved, lengthy delays are still common. In addition, many US embassies and consulates have significant backlogs for appointments to seek visas for entry into the US.

Visas

Employers often consider the H-1B and L visas when sponsoring foreign nationals for employment in the US. However, due to increased scrutiny and changes in the immigration processes for the above visa classifications, employers may also wish to consider the H-1B1, E, and TN visas in place of the H-1B and L.

H-1B visa

The H-1B visa is generally reserved for specialty occupations – positions that require the theoretical and practical application of a body of highly specialized knowledge and that require the attainment of a bachelor’s degree or higher in a specific specialty or its equivalent, as a minimum for entry into the US. New H-1B petitions are sometimes subject to an annual lottery due 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 visa

The L visa is generally reserved for international companies seeking to transfer executives, managers or specialized workers to the US. Like the H-1B visa, the L visa has experienced heightened scrutiny in recent years, resulting in 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.

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 visa

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 due 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 visa

Another option for sponsorship of foreign national employees is the E visa. The E visa 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 the employee must 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 more easily attainable. As with the H-1B visa, employers have generally found the E visa to be reliable, fast and cost-effective, although there is concern with timing due to the lack of visa appointments at numerous US embassies and consulates.

TN visa

The TN (NAFTA) visa allows employers to sponsor citizens of Canada and Mexico for employment in the US in a professional capacity. While the North American Free Trade Agreement (NAFTA) has been replaced by the United States–Mexico–Canada Agreement (USMCA), the USMCA has retained 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 generally found this visa classification to be reliable, fast and cost-effective. Of note, an employer seeking to sponsor a Canadian citizen for employment under this visa classification may simply need to 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.

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 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 certification by the applicant that they have 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 to 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

Criminal checks

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 of Indianapolis. Thus, requests for, and the process of, background checks must be appropriately tailored to state and local laws, and proper authorization is required when third-party vendors are used for this purpose prior to completing the background checks.

Credit 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 an analysis of the job-relatedness of a credit check to the position in question to avoid unnecessary legal exposure.

Medical information

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 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:

• more time;
• reading the questions aloud;
• answering in a different format (eg, dictating); or
• 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 Changed Perspectives

The COVID-19 pandemic did not change this basic process, but it highlighted a host of new issues that might arise during the interactive process, as well as cause employers to revisit what the essential functions of a job are. For example, an applicant may have an underlying condition (eg, asthma, diabetes) for which they seek reasonable accommodations that may not have been discussed pre-pandemic. In addition, while 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 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.

Uses of AI

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 incorporated in the interview process through the use of programmed “chatbots” 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.

AI and Bias

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 bias 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”. 

AI and the ADA

An AI hiring practice could also contravene 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 in connection with pre-employment candidate assessment.

AI and Risk

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.

During 2020 and 2021, employers’ use of restrictive covenants to limit their employees’ post-employment competitive activities became a more volatile issue. Presently, there is no federal law governing an employer’s use of restrictive covenants. However, on July 9, 2021, President Biden issued an executive order on “Promoting Competition in the American Economy” which, among other things, was critical of employers’ use of non-compete agreements. The executive order directed the Federal Trade Commission (FTC) to “consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility”.

In early 2023, the FTC promulgated proposed regulations to address this issue, with a comment period that ended in April 2023. More than 26,000 comments were received regarding the FTC’s proposed rule. In addition, in early 2023, a bill titled “The Workforce Mobility Act of 2023” was introduced in the House of Representatives which, if passed, would eliminate the use of non-compete agreements in most employment relationships.

The enforceability of restrictive covenants is currently heavily dependent on state law, which can vary dramatically on this subject. Some states consider non-compete and non-solicitation covenants to be void and unenforceable under almost all circumstances. However, other states 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.

Generally, Indiana law supports enforcement of covenants not to compete when the employee had access to confidential information or trade secrets or has obtained some business advantage as a result of close contact and exclusive dealings with customers. An employer’s promise of continued employment and payment of wages is sufficient consideration to support an employee’s covenant not to compete.

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 which of the employer’s interests 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 has 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 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.

Indiana 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. Then, effective July 1, 2023, Indiana law prohibited employers and “primary care physicians” (which includes physicians practicing family medicine, general pediatric medicine, and internal medicine) from entering into noncompete agreements.

In addition, 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 and Detention

Unwanted touching could be viewed as battery and 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.

Electronic Equipment

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 cellphone, 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 these 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 to employees.

Surveillance Programs

With respect to monitoring employee activities in the workplace, this is generally 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 areas 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 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 and state laws (including those of Indiana) 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 government 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.

Training Programs

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.

Impact of Social Justice Movements

Recent social justice movements have pushed global entities, including those operating in the US, to take a hard look at anti-discrimination and anti-harassment policies, and commitment to social justice and diversity. Employers have been re-examining how they manage their workforces and how they interact with their communities. Indeed, global employers that are not committed to these initiatives – including a commitment to make it clear that they oppose racism, sexism and other forms of discrimination – risk damaging their global image, and damaging their ability to recruit and retain employees, particularly a diverse workforce. The pervasiveness of social media brings scrutiny and rapid societal response, implicating companies and employees who can be tied to them.

Racial and social justice movements have placed a spotlight on discriminatory actions and practices, including systemic racism and implicit bias. This has led employers to provide additional support and training to their existing workforces in an effort to mitigate or eliminate bias, thereby enhancing their abilities to recruit, hire and develop diverse workforces.

While US employers have adopted and implemented long-standing policies prohibiting harassment based on legally protected characteristics, the attention placed on this issue by the “Me Too” movement and the publicity generated in recent high-profile cases have initiated a seeming cultural shift from preventing conduct that is illegal to promoting a respectful and inclusive work environment. This shift can be seen in training being provided by employers (focused on civility training and respect), as well as the focus of anti-harassment policies. 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.

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 (“IOSHA”) administers the OSHA statutory and regulatory mandates.

IOSHA 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 IOSHA is required to enforce standards at least as effectively as federal OSHA, by law IOSHA is prohibited from adopting or enforcing any standard that is more stringent than federal OSHA (IC Sections 22-8-1.1-17.5).

Because IOSHA adopts and enforces all federal OSHA standards and enforcement guidance, Indiana employers are challenged by the need to keep up to date with federal, state and local guidance and respond quickly to any complaints as they arise.

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 member assigned to that geographic location. Appeals against the decision of the single member of the hearing may be appealed to the full Board.

At-Will Terminations of Employment

Indiana is an at-will employment state, with less regulation of the employment relationship than seen in various other states. There are, however, exceptions to employment-at-will, including:

• adequate independent consideration (eg, an employer’s promise of job security or permanency); 
• violation of a statutory duty or right (eg, worker’s compensation retaliation); and
• promissory estoppel (eg, employee reliance on an employer’s promise to the employee’s detriment). 

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 are not typically 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 practice dictates 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 is 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 Act) 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 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 this is 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 on an employee’s separation. Care must be taken, however, to ensure that the company follows the state’s requirements for keeping employees at-will.

In Indiana, employees are generally presumed 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, which state that 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, these are most often 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 attorneys’ fees or additional categories of damages in the event they prevail in a dispute under the agreement, which can be significant sums.

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.

In class and collective wage 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.

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 must 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 pay 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 the 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’s 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 to 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’s 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.

A variety of federal and state laws protect employees who report perceived unlawful acts. Even if it is ultimately determined that the employee’s perception is wrong, the employee will generally 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.

Should a whistle-blower be disciplined or discharged in the wake of reporting such perceived unlawful acts, the employer must typically provide substantial evidence of its non-retaliatory reason for the discipline or discharge.